While the IRS has historically cultivated a reputation for stern negotiation, the last two decades have seen a slight softening in this position. Certainly, they will take steps to recover money owed to them, but the IRS Restructuring and Reform Act of 1998 requires an improved level of communication and granted taxpayers a voice to discuss their situation.
Even with the Act in place, it is wise to remember certain tips when you owe money to the IRS:
- Do not ignore IRS communication: It is not uncommon for individuals to make a difficult situation much worse by choosing to ignore communication rather than act quickly to resolve the problem. In general, the IRS will send communication via certified mail to guarantee the letter makes its way to you. In the steps that follow, the IRS need only prove that it made the good faith effort to give you notice of your rights. When you refuse to take delivery of the mail, it only serves to deprive you of the information you need and the right to contest your tax bill.
- Do not assume the IRS is infallible: Even an enormous government organization with unlimited resources can make a mistake. It is not uncommon for individuals making scheduled payments under an installment plan to find that the IRS has lost track of one or several payments. It is wise to keep meticulous records and meet with the IRS to discuss any potential errors that might have led to additional debt.
- You might be an innocent spouse: In many situations, individuals learn that their spouses had run afoul of certain IRS regulations. Whether widowed, divorced or separated, if you can show you played no role in your former spouse’s actions, you might be entitled to innocent spouse relief.
- You have options: Based on the factors of your unique situation, you will likely have numerous options to explore when you owe money to the IRS. From negotiating an offer in compromise and scheduling a payment plan made over installments to exploring whether income taxes are dischargeable in bankruptcy, it is wise to gain a clear understanding of what options make sense in your particular matter.
It is wise to work with a skilled attorney who can provide the legal guidance and insight you need regarding these complex financial matters.