Don’t Delay in Handling Your Tax Debt
Benjamin Franklin once said, “In this world nothing can be said to be certain, except death and taxes.” While Ben’s general observation has proven accurate through the passage of time, the fine print on that statement is not to be overlooked. This is especially true when it comes to a tax debt.
Hopefully, you’ve never faced an IRS Notice of Assessment and the resulting liability. If you do, though, there are some unique dimensions to your debt that make it more than simply another bill to pay. More importantly, your solution to the tax issue in question should be crafted cautiously, and without delay.
First Response, Best Practices
Once you have verified that your IRS Notice of Assessment is accurate, you have to decide how you’re going to pay. Keep in mind, there’s no one right way to satisfy what you owe. While your best course of action is always to pay and pay immediately, your financial circumstances may not allow for this. As such, the IRS has options for taxpayers of varying means who seek to handle their tax debt through a legal, formal resolution.
You will likely have the option of selecting a payment plan, otherwise known as an Installment Agreement, which enables you to pay your tax debt over several years. If your financial situation is dire, on the other hand, you may qualify for Currently Not Collectible status; this prevents the IRS from pursuing collection action until your finances take an upturn. In any event, you want to respond to your notice as quickly as you can. Remember, you will have a deadline to do so.
Reasons to Respond
There are a variety of tools that the IRS will employ to encourage you to handle your tax issue in a timely fashion. Some, like failure-to-file and failure-to-pay penalties, are punitive. These costly add-ons to your tax liability are invoked when you don’t handle your filing and payment responsibilities by a given due date. Penalties and interest can also accrue monthly for the life of your tax debt. This means that even if you’re in an Installment Agreement, part of what you’re paying each month includes these additional fees.
Since your tax debt is literally growing as you’re in the process of satisfying it, paying it off as quickly as possible is in your best interest. Similarly, as long as you’re in Currently Not Collectible status, all of those additional penalties and interest charges build. If and when you are able to start making payments, your original tax liability will be substantially larger than when it was first assessed.
Perhaps the best incentive for you to take action in resolving your tax problem is the inevitable IRS response. Assuming you ignore repeated notices requesting payment, the IRS has the ability to simply take from you what is owed. This is achieved through aggressive collection action, which can include garnishing your wages, placing a levy on your bank accounts or seizing your property. Certain IRS actions, such as a bank levy, can wipe out your finances and may be difficult to contest.
The Professional Approach
When you’re mapping out your tax resolution, a savvy move is to consult with a reputable tax resolution company. These organizations specialize in working directly with the IRS on your behalf, seeking the lowest payment allowable by law. Additionally, costly penalties can in some cases be challenged and abated. This operation can be complicated and can benefit from a licensed tax professional’s experienced touch. You certainly want to be presented with the optimal solution.
What you pay each month in an Installment Agreement, for instance, can vary depending on what you owe and the circumstances surrounding your debt; the execution of such a request is a tax professional’s forte. When you’re resolving a tax problem, you can’t afford to underestimate the IRS’ resolve in obtaining what they claim you owe. Alacrity and tenacity in meeting this challenge are essential and demonstrate the poise of a wise taxpayer, indeed.