Dealing with the IRS When You Owe Money

The IRS is a powerful institution, which is why many people live in fear of it.

Every letter from the IRS incites fear, even among those who know they do not owe money and are compliant.

When you do have an issue with the IRS, such as back taxes or a massive tax bill with no way of paying it, then you have to deal with it. When you interact with the IRS, there are a few things you should do, as well as a few actions to avoid, to ensure you get the best outcome possible.

Take Immediate Action

The last thing you want to do upon receiving a letter from the IRS is to simply avoid it and try to make it go away. That will not work. You will end up facing collective action or whatever the IRS has promised in the letter. Instead, take immediate action. If you are unsure what the letter means, contact the local IRS and ask. Or even better, contact a tax professional, who will not only explain to you what is happening but will also work on your behalf to help you get through it. They will also let you know whether there is an alternative solution, such as applying for an Offer in Compromise, Penalty Abatement, Installment Agreement, or something else.

Don’t Do It Alone

Unless you are an expert in the tax code, you do not want to work on your own. At least have one meeting with a tax professional to better understand what is going on, as well as your options, as discussed previously. It is best to let a tax professional work on your behalf, as they are experts in negotiating with the IRS. You also do not have to stress or worry, since someone else is taking care of it for you. You might also end up saving a significant amount of money on the tax bill.

Do Double Check

The IRS might be a powerful agency, but that does not mean they do not make mistakes. Upon receipt of a letter stating you owe money, double check that it is the case before you simply pay. You have 30 days in which you can appeal the decision in the letter before collective action is taken against you. If you feel that the amount is wrong, even if you do know you owe money, then go through the process to appeal it and ensure that you pay only what you owe.

Don’t Get Scammed

Unfortunately, there are many people who try to play of off people’s fear of the IRS to get money. When you receive a letter saying you owe money to the IRS, make sure it is legitimate before you take any further action. It is good to know that the IRS only contacts people through the mail. They also never threaten to take immediate action or require you to pay a certain way. Instead, you will have 30 days to take action, which includes requesting an appeal or applying for a tax relief program. If you think that the letter is false, then look up the phone number of the real IRS and then talk with an agent to ensure that it is real. Then, take action with the knowledge that you are not getting scammed.

These actions will help you to handle your tax debt without hurting yourself any further. You do have power when it comes to negotiating with the IRS. Working with a tax professional will help you to fight for your money and ensure that your case is handled appropriately and increases the chance that any negotiations will end in your favor, rather than that of the IRS.

What's Next?

Answer a few questions and see if you qualify for tax relief online.