Discovering that you have unpaid taxes can evoke a sense of dread. Fear, confusion and a sense of panic can swiftly set in.
However, it is vital to remain calm and composed. There are many taxpayers who end up owing back taxes, and there are steps you can take to remedy the situation.
The first step is to respond promptly to any notice from the IRS. Ignoring the problem will not make it go away, but it will allow interest and penalties to accumulate. So, once individuals receive a notice, they should review it carefully to understand the amount owed, the tax year involved and the reason for the discrepancy.
Verify the accuracy
The next step is to verify the accuracy of the IRS’s claim. Mistakes can happen, and it is possible the IRS made an error. Individuals should compare the notice with their records, such as filed tax returns and related documents.
Seek professional help
If the tax issue is complex, it might be beneficial to seek help from a tax professional. They can provide advice, help interpret tax laws and assist in communication with the IRS.
Set up a payment plan
If it turns out that the back taxes are legitimate, and individuals are not able to pay the full amount at once, they can consider setting up a payment plan with the IRS. The IRS offers various payment arrangements, such as short-term payment plans and installment agreements.
Consider an offer in compromise
In some cases, the IRS may accept an offer in compromise, which is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. However, the IRS generally approves an offer in compromise when it believes that it is unlikely to collect the full amount, based on the taxpayer’s income and assets.
Finding out that one owes back taxes to the IRS can be a frightening experience. However, it is possible to manage the situation successfully. It is essential to deal with tax issues head-on to prevent them from escalating into bigger problems.