Owing money is stressful, and no collection agency inspires fear quite like the IRS. Almost everyone has to pay taxes, and when they get out of control and you cannot afford your tax bill, it can become a problem. It is easy to fall into a disastrous pattern of denial and stalling.
Luckily, it is possible to solve your IRS tax problem with just three simple steps. Although they are simple, they are not always easy. However, you will find that the time and effort you put into it will be worth it when you no longer have to live with the burden and hassle of federal tax debt.
Step 1: Read and Respond to All Correspondence
The most important step to take when you owe money to the IRS, whether it is $10 or $100,000 is to open, read, and respond to all correspondence. The agency will alert you about every step of the collection process with plenty of time to take action and appeal any decisions.
Generally, you first receive a tax bill. You have 30 days to pay it. Upon non-receipt of your payment, the IRS will enter collection, although it might take them more time to act upon it. This starts with a lien against your property, such as your house or car. Then, they will advance into a levy, which allows them to seize one or more of your assets. This might include your wages, bank account, house, car, or other real property.
Upon receipt of each letter alerting you of the next step in the collection process, you have at least 30 days to take action using one of the following two steps or appealing any decisions. By doing so, you can stop or at least delay the collection process, giving you time to find a better solution so you do not lose your property and end up in a far worse financial situation.
Step 2: File Any Outstanding Returns
After you have read and responded to any IRS correspondence regarding your bill, take some time to review your filing history. If you have any outstanding returns, be sure to fill them out and file them. There are two reasons for this.
First and foremost, when you do not file a return but were required to, the IRS will eventually file one on your behalf using a Substitute for Return. However, this generally does not give you the credits, deductions, and exemptions for which you are eligible. In many cases, you end up owing much more than you should. By filing a tax return, you can reduce the tax bill for that year. In some cases, you might end up with a refund instead of a bill!
The second reason to go ahead and file any outstanding tax returns is that many of the tax relief settlement programs require you to be in — and remain in — compliance for all other tax years. Thus, it is a good idea to go ahead and file the returns, even if it does not impact your tax bill.
Step 3: Pay Your Tax Bill OR Apply for a Tax Relief Settlement Program
Once you have filed any outstanding returns, it is time to take care of the tax bill itself. If you are able to, go ahead and pay it off. You might need to sell something, take out a personal loan, or use a credit card. Although these options are not great, they are generally better than facing collection action from the IRS.
If you have no immediate options for paying off your tax debt, then apply for one of the tax relief settlement programs. This includes:
- Installment Agreement
- Currently Not Collectible
- Penalty Abatement
- Offer in Compromise
- Innocent Spouse Relief
The easiest for approval is the Installment Agreement. This allows you to set up a monthly payment on your terms, rather than facing a wage garnishment where the IRS takes as much as they want beyond a measly living allowance.
Bonus Step: Get Help
You do not have to handle the situation on your own. Upon receipt of your initial notice from the IRS about your outstanding balance, seek help from a tax professional, like those at Fidelity Tax Relief. They can help you navigate through the steps and find the right solution for your situation. Call us today at 877-372-2520 and find out how we can help you avoid collection action by the IRS.
