Tax debt occurs when you owe a balance on your return after initial tax forms are completed. The number one key to preventing further problems with your taxes is to not ignore the problems. There are several items of which you should be aware, if you are one of the thousands of people who suffer from tax debt.
- Do not panic. There are a few different scenarios that can occur if you receive notification of tax debt on your Statement of Account, so the best approach is to not lose your nerve before you fully comprehend the situation.
- As I said above, the worst possible thing to do is to ignore your tax debt and expect it to simply go away.
- One hope to hold out for is that the amount on your Statement of Account may be wrong. While you may not always be right, if you disagree with the amount of tax debt the IRS asks for, there may be opportunities to correct it. It is best to contact the tax office that deals with your tax return directly to get the necessary adjustments made, because collectors are not always familiar with the process of tax debt figures.
- If you are unable to pay the full amount of your tax debt, you are allowed to pay it off over time. Although relatively small, there is still, of course, interest, so it is best to pay off the remaining tax debt as soon as you can to avoid digging yourself into a bigger hole.
- Some people are afraid of criminal persecution and/or imprisonment if they are unable to pay their tax debt. While the Internal Revenue Service does prosecute a small number of tax debt cases every year, they are usually cases of severe dishonesty or evasion. There is the possibility of a court summons for those who do not pay their tax debt, and a failure to appear in court could lead to a prison sentence.
- Do not forget that you, as a tax payer, have rights. The IRS has a Service Commitment, which promises to treat you fairly and courteously. If you believe the collector dealing with your tax debt has in any way treated you unfairly, you can appeal to the IRS and ask for your case to be handled by someone else.
- If you have never declared your income, you may not even receive notices from the IRS, despite your having a tax debt. This could potentially be more serious than other forms of tax debt because you could be charged penalties for failing to report your income, and in some cases, even be prosecuted.
- It may be a good idea to seek professional help if you are confused about why you have to pay tax debt. Dealing with tax debt can be complicated, and the assistance of a tax lawyer or other type of consultant can help you create a payment schedule and offer other advice concerning tax debt.
By Monica Drusch