If you find yourself in a situation where you owe back taxes to the IRS, don t panic. It may seem like the end of world, but it s really only a bump in the road. But you have to handle it swiftly, as soon as receive a notice from the IRS. Resist the temptation to ignore it, as that will only make the problem worse. Here are five things you need to know if you find yourself owing money to the IRS.
1. You Don t Have to Pay the Full Sum…at least not yet. The IRS will assume that because you haven t already paid your taxes, you are unable to do so, so they will allow you to pay your back taxes in installments. But it s not as easy as all that.
2. Full Financial Disclosure. Creating a payment plan with the IRS isn t like working out debt with a doctor or even a collection agent. You don t get to negotiate how much to pay the IRS…they get to tell you how much you will pay. And in order to determine how much you will be required to pay, the IRS will have to go over your financial records with a fine tooth comb. But they won’t stop at your financial records; they ll look at all of your assets. They will determine what your allowable expenses are each month based on your lifestyle and they will require that every penny above and beyond those allowable expenses goes to them.
3. Proving Yourself. If you disagree with the IRS s assessment of what is allowable, then you ll have to prove it to them. The burden of proof is always on you, the taxpayer. The IRS isn t going to give you the benefit of the doubt…ever.
4. The Real Cost of Debt. Even after you’ve worked out your payment plan with the IRS, they will continue to assess interest and penalties, which typically amounts to 25 of your debt. So depending on how much you re paying each month, you may find that your overall debt never shrinks. And if you ever start making more money, the IRS will know about it and will increase the amount you owe on your payment plan each month.
5. The IRS is Waiting for You to Fail. That s right. They re just waiting for you to miss a monthly payment so that they can start the real collection procedure. This includes seizing property, and they already know about all of your assets because you’ve disclosed them.
Despite the terrifying details listed above, there is a way to survive owing back taxes to the IRS. Hire a tax attorney. Hire one before you ever get into trouble and you ll be more likely to avoid the IRS in the future. Hire one when you find out you re in a quandary and they will advocate on your behalf throughout the whole process. They can help you set up a payment plan that is more manageable that one you would receive if you worked with the IRS on your own behalf. They can help you make cohesive and convincing arguments about allowable expenses. Most importantly, they can field all phone calls and correspondence from IRS agents. IRS agents are ruthless, and they won t let up until they are satisfied that they ve gotten what they re looking for. That constant barrage of phone calls and mail can be stressful, so having someone handle on your behalf can reduce a great deal of the stress you feel as the result of back taxes.
So hire a tax attorney today. Avoid future tax problems and clear up the ones you have now by letting a qualified attorney advocate on your behalf. You ll be pleased with the results once you move past this little bump in the road.
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