Finding out that you owe back taxes to IRS can be a disheartening experience. Whether you knew it was coming or you are completely taken off guard, now is the time to start thinking about how you’re going to handle the debt.
Initially, it’s important to stay calm. There are steps you can take to resolve your situation successfully. Patience can also help you get through this tough time. It may take several weeks or months and a number of back-and-forth interchanges to get you and the IRS on the same page and moving toward a common goal.
If you received a letter from the IRS indicating that you owe back taxes, contact the agency for clarification. You can write or call the department and ask for help understanding why your tax bill has changed. The information provided may lead to you to re-evaluate your current year’s return preparation or to seek outside help.
Instead of accepting a tax return as is, get a second opinion from a professional to ensure that the return has been completed properly. Individuals and professional tax preparers can easily make mistakes that can change a person’s tax outlook. Get a second opinion to determine a) if you have applied all the relevant credits/deductions and b) if there are any numerical or calculative mistakes that are skewing the return results.
With back taxes owed to IRS, you may want to consider seeking the advice of a tax resolution expert. A legitimate tax resolution expert who has a legal background, demonstrated success, and a transparent approach to the resolution process may be one of the best ways to approach your debt.
Working with a tax resolution expert offers a couple of distinct advantages. A professional can speak with the IRS on your behalf, has a deep understanding of the laws and IRS code, and will know several resolution alternatives that may be viable for your situation. Without professional help, individuals who don’t understand the IRS code could end up paying more than necessary over a longer period of time.
Additionally, professional help can deliver peace of mind that you are doing everything within your power to resolve your debt situation successfully. Individuals and companies that are owing back taxes commonly seek the advice of tax resolution specialists before making arrangements with the IRS.
Negotiating a Settlement
As with any other debt you take on, tax debt is subject to penalties and interest that can compound over time and leave you paying off a far higher bill than necessary. There are several ways to minimize the debt you owe, including proving financial hardship, proving extenuating circumstances, and decreasing interest and penalties under the safe harbor rule.
You may have read about payment plans and ways to reduce penalties and interest, but there are other rules that may help you minimize your debt. A professional can help you evaluate your overall financial standing and choose a settlement strategy that will benefit you most. Whether you choose to have your case reviewed by a professional (typically free of charge) or settle your debt on your own, avoid agreeing to use personal credit cards and other financial assets like your retirement plan to pay off your debt. Doing so could lead to even more interest and taxes owed.
Common Questions Answered
You may have a long list of questions when you find out you owe back taxes. Here are some of the most common questions answered:
Can I still get a refund if I owe back taxes?
If you truly owe back taxes and it’s not a mistake, you will not be able to claim a refund. The IRS will take money from any refund (state or federal) and apply it to your debt.
Can I buy a house if I owe back taxes?
Every debt situation is a little bit different. Some people can still purchase a home, while others can’t. The answer depends on your payment plan, your debt-to-income ratio, your credit score, and other factors. Consult a professional before trying to apply for home loans if you owe back taxes.
Are there credits I can still claim to offset the debt?
There may be other credits that you can claim once you have discovered that you owe back taxes. A professional can help you determine if there are applicable deductions or credits that should have been applied to offset the amount of debt or erase it entirely.
There is no need to panic, even if you owe a significant sum to the IRS. Contact Long Island Tax Resolution Services today for IRS back taxes help.
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