IRS tax debt can cause a lot of stress and anxiety. Some people panic and end up making their tax problems worse. Watch out for these three common mistakes when you have IRS tax debt.
Mistake #1: Ignoring the IRS
It may seem easy to ignore your tax debt at first. You receive a letter in the mail from the IRS, quickly look at it, then decide that you’d rather not deal with it right now.
This is a mistake because tax problems tend to worsen over time for several reasons:
- Penalties and interest accrue each month, increasing your unpaid balance.
- The IRS will eventually pursue more aggressive collection tactics, such as federal tax liens and bank levies.
- Some tax laws are triggered when your balance grows beyond a certain amount. For example, the IRS may be able to ask the State Department to deny your passport application if your balance exceeds $52,000.
You’ll also have more time to contact a tax attorney and resolve your issues if you take action early. Later, you may only have a few days or weeks to fix things when there are impending levies and other deadlines.
Mistake #2: Not Understanding All of Your Options
Every tax debt case is unique. If you try to use the wrong tax relief strategy, it could end up costing you money and wasting your time and energy.
For example, taxpayers who call the IRS Automated Collection System may be asked to enter into a streamlined installment agreement. This may be the right option for some taxpayers, but others may find the payments are too high to keep up with. If you default on your payment plan, you’ll once again be at risk of IRS enforced collection actions.
There are many tax relief programs available, including penalty abatement, innocent spouse relief, and tax debt settlements. If you don’t know what your options are, you may not end up getting the best possible deal.
Mistake #3: Not Identifying the Cause of the Problem
Once you’ve worked out a deal with the IRS, you also need to keep up with your current tax obligations. If you haven’t identified the source of the problem, you may continue to accumulate tax debts that you can’t pay off.
Is your withholding too low? Are you taking advantage of all of the tax deductions you’re entitled to? You may want to do a “Paycheck Checkup” or review your estimated tax payment amounts. If you can avoid owing a big tax liability when you file your return, you’ll be less likely to have recurring tax debt problems.
The Gartzman Law Firm handles IRS tax debt and other tax resolution cases. Use our contact form to request a consultation with an Atlanta tax resolution attorney.