If you’re like most people, a letter from the IRS is a nerve-wracking experience, particularly when you find out you owe back taxes. While the initial notice can be upsetting, finding out more about tax debt and how it works can set your mind at ease.
What is Tax Debt?
Each year, the IRS audits about 1-2% of the tax returns they received; if you were in that number, then you may be contacted about a tax debt. Any taxes owed to the IRS after the original filing date has passed is tax debt. Your total amount due will be included, along with any penalties; the penalty system is what makes tax debt accrue so rapidly; your debt will continue to go up the longer you owe it.
How Can You Tell if you Have Tax Debt?
For most people, the first clue is a notice from the IRS or even the seizure of a hoped-for tax refund. If you are not sure, though, you can call the Department of the Treasury to learn more. You could possibly owe for a variety of reasons, including:
- Errors on your tax return
- Past due child support
- Student loan debt that is in default
- Other Federal agency debts
- Income tax debt owed to your state
- Other state obligations, including overpaid unemployment compensation and related issues.
Act Quickly When You Have Tax Debt
Contacting you is only the beginning; the IRS will basically redo your tax return to determine how much you owe, and add on any penalties. They do not, however, look for credits or deductions you missed. Because of this, and the rapid accumulation of penalties and interest, you need to act quickly to resolve the issue.
As a government body, the IRS also can garnish your wages or even place a lien on your property, so quick action is needed to pay down, settle or eliminate this debt. It won’t go away, particularly if you try to ignore it; it will just keep growing and taking over more of your income and your life. Consider one of these options to tackle tax debt:
- Make Monthly Payments: you can work with the IRS to set up an installment plan that is affordable for you and pay your debt down, just like you would for any other creditor. Be careful, though – missed payments or default is even more costly than the original debt in most cases. This works best if you have monthly income to dedicate to the task or can easily pick up some extra hours or earn some extra income.
- Identify an Injured or Innocent Spouse: In some cases, that tax liability is only owed by one of you, not both. While you will still owe the debt, you may be able to recover some of your tax refund or prevent garnishment or other actions for the partner without the debt. Learn more about injured spouses to find out how this program works and what to do if you qualify.
- Get Professional Help: The fastest and easiest way to resolve your tax debt is to speak with a tax professional; someone who regularly works with the IRS will be able to give you some clear insight into your case and help you figure out the best way out. A tax debt relief expert works with income tax issues every day and can provide instant assistance and the peace of mind you need to move forward.
Get Help with Tax Debt
If you have a garnishment or lien, or have received a tax notice and are worried about how to deal with it, we can help. Our tax debt relief specialists can walk you through the process and help you choose the option that is right for you. Contact us today – don’t delay!