Folks, I can’t stress enough just how important it is to pay your taxes. As simple as that sounds, many taxpayers underpay throughout the year and end up accumulating on their tax bill over time. Avoidance with regards to filing your tax returns can complicate your life, quickly, and the IRS can apply a range of penalties for non-filers, including return delays, all the way to civil and criminal penalties. If you’re the kind of person that’s paralyzed with filing or you’re afraid of getting it wrong, the IRS has a Taxpayer Advocacy Service (TAS) that provides resources for those struggling with their past and current returns. Several options are available to cover back taxes, and many of them are offered through the IRS itself.
Let’s get one thing straight, though. You’re going to pay them. Even taxpayers that have money invested in tax advantaged accounts will eventually pay on those assets’ growth, with exception to some tax-exempt assets. For the non-millionaire class, you pay your taxes when they’re due, both in the short and long terms. But what happens when you’re buried in tax debt and you’re getting letters from the IRS? First, you have to answer those letters “promptly.” A defensible argument is a response no later than 7 days of receiving the notice. These are mostly automated letters informing the taxpayer of a shortage in payment from last year’s return. These are simple. But if you’re unable to pay this, then the IRS offers a few different payment plans that can also double as a response to the letter.
There are companies out there that purport to give you tax relief assistance to pay on this debt. These are available at a premium and will cost you more than going directly through the IRS. The only website you need when setting up a payment plan is this one: https://www.irs.gov/payments. This website will show you the different payment options you have to cover your debt. It’s also the place you go to pay on your quarterly taxes, so bookmark this page and call the IRS for any questions specific to your situation. The agents are very helpful and will gladly guide you through the process. To set up your payment plan, you will need your tax return available and some idea of how much you’ll be able to budget your payments. Try to avoid any websites that offer these services that do not end in “.gov.”
For those that owe $10,000 or less, work with your tax professional to see where they can help, especially if you filed yourself. It’s not uncommon to find deductions or credits that could have been applied in past returns, reducing your tax burden. Filing amended tax returns is a possibility if there’s an opportunity for you to reduce your tax liability. Let the IRS know that you’re working on this, establish a payment plan, then work on reviewing past returns. If you have a tax savings, then call the IRS and adjust your payment plan accordingly. For those that have accumulated more than $10,000 in back taxes, you have the option to reach out to a tax attorney to see if any of it can be settled. Attorneys can really drive down your tax burden to a more manageable amount.
Tax return preparers are limited in representation in IRS court. Enrolled Agents and CPAs can offer more representation, but these professionals may or may not have the capacity to take these cases and will likely refer you to an attorney. Tax attorneys specialize in tax matters and will give you full representation in IRS court. They’re an effective way to reduce back taxes for the price, and they’re a valuable resource in helping you avoid another accumulation scenario.
The IRS really isn’t as terrifying as they sound. They have a 16th Amendment responsibility to take revenues to continue programs for a functioning government. Whatever your feelings are about government spend or “taxation is theft,” you can’t avoid this responsibility, and the IRS knows that it’s a burden on the taxpayer. They are not your enemy, and they’re also not loan sharks. They are more than willing to work with you to ensure you pay your fair share without imposing undue burden on you and your family.
More comfortable working through a tax professional? Reach out to one and they’ll point you in the direction of getting your back taxes resolved. The process is easier than you think, but it requires your commitment, so stop putting it off and take a little stress off your shoulders by being attentive and proactive.
Tree City Tax is accepting new clients for the upcoming filing season, including small business returns. You can book a consultation by calling at (330) 539-4231. Small businesses that schedule a consult before the end of the year reduce their likelihood of filing an extension.