How to Deal with the Most Common IRS Tax Problems
Filing your taxes isn’t the easiest thing in the world, so it can be really difficult to resolve a tax problem with the IRS. But the worst thing you can do is put your tax issue on the backburner—if you continue to neglect the issue, it’s possible that you could get audited by the IRS or face hefty penalty fees.
The best way to protect your finances and prevent a personal financial crash is to resolve any IRS tax problems as soon as possible. Here are some of the most common IRS tax problems, and how you can resolve them.
Failure to File a Tax Return
Has the tax year come and gone, and you still have to file your income taxes? You’re not alone. Every year, there are about 7 million taxpayers who fail to file a tax return. There’s lots of reasons for this. Most of the time, people don’t have all the information they need to complete their return, or there’s an error on their submitted return and they never amend it.
If you never filed a tax return, there’s an easy way to resolve the situation: just file your return late! Yes, you will probably have to pay IRS late fees, and these fees can be extremely high. But an IRS audit is far worse, and so are potential liens and property seizures. The IRS is also somewhat reasonable—if you have a tax bill that’s too high for you to pay, set up an appointment at your local IRS office and ask about setting up a more affordable payment plan (necessary given the sorry state of millennial finance).
Error on Your Tax Return
One of the main reasons that people don’t file their taxes is because there’s an error on their tax return that they’re unable to amend. There are so many things you’ve got to report on a tax filing, but it only takes one error for your filing to be rejected. Sometimes, these errors are caused by a simple taxpayer mathematical miscalculation. Other times, the taxpayer has reported the wrong personal information, or has provided information that doesn’t match their prior year’s tax return.
When there’s an error on your tax return, the IRS will usually mail you a notice that gives you very clear instructions on what you need to mail them. Follow these instructions and you should be able to resolve the conflict. If you’re not sure what an instruction is asking for, just schedule an appointment with your local IRS office.
You might also get an IRS Notice of Deficiency, which states that you still owe tax money to the IRS. Most of the time, it’s because there’s some income you had during the year that you didn’t report. Just file your tax return again and be sure to report all your income.
IRS Penalties and Fees (what if you can’t afford to pay)
You may have to pay late fees when you file your taxes late, and you may also be penalized if you fail to pay your owed taxes. You may also have to pay interest on your outstanding tax payment if you wait too long to pay it.
Oftentimes, people don’t pay their owed taxes because they simply can’t afford to. If that’s your situation, you should make an appointment with your local IRS office. The IRS is usually pretty flexible about setting up affordable payment plans so you can pay off your debt without having to break the bank. You could also consider taking out a personal loan to pay your tax obligation—you might get a favorable installment amount, and you’d avoid any further trouble with the IRS.
Tax Lien or Audit
If your back taxes pile up too much, the IRS may impose more severe financial penalty, like a tax lien. A tax lien may give the IRS permission to liquidate some of your property or assets in order to settle your debt.
A tax audit—in which the IRS pores over every aspect of your finances—is another major problem. Sometimes you may get audited at random. But you could also be audited if you have too many back taxes or if the IRS feels that there are jarring inconsistencies with your tax return.
In the event of a tax lien or audit, your best bet is to seek out a tax professional. Tax professionals know exactly how to work with and negotiate with the IRS so you can achieve the best possible end result.
So long as you’re prompt, you should be able to handle these tax problems, no sweat.