If you find yourself owing the IRS money after you file your taxes, don’t worry—the IRS Restructuring and Reform Bill of 1998 was designed to force better communication between you and the IRS. In other words, they are required to grant you due process rights when they come to collect what you owe. However, if you try to ignore the IRS, they can also make your life a living hell. Here are some things to keep in mind when you owe the IRS.
Pay attention to notices.
Don’t ignore them! Most people get into big trouble not because of what they owe, but from ignoring their notices from the IRS. Some are sent by certified mail, so be sure to go to the post office if they request that you pick up your notice. Ignoring these is not going to help your situation; answer each time they reach out.
The IRS must explain your rights to you.
You have a right to legal representation, and you also have a right to be treated professionally and fairly. Keep in mind that, if for whatever reason, you do not like the way you are being treated, you are allowed to stop the interview and request to speak with someone else.
Seek a tax expert before going to the IRS.
A tax expert can tell you exactly what you need to do to prepare for your collection interview, how to act, what to bring, and what the IRS officer could do in order to take advantage of you. At the end of the day, the IRS officer’s job is to collect money on behalf of the government.
Bring an IRS tax attorney with you.
A collection interview will probably be a little stressful, and it isn’t always easy to know what you should answer and what you shouldn’t. If you bring representation along, it isn’t a guarantee of a better outcome—but it certainly won’t hurt.
The IRS is not perfect.
The IRS has to handle quite a few companies and individuals—as in, millions of them. With that said, the IRS can have a hard time keeping track of how much you owe. This is especially the case if you have been making regular payments. Keep in mind that the IRS can make mistakes, so double check everything that they say.
You have rights and due process.
The IRS can’t just seize your funds, your business, your car, or your wages without giving you notice ahead of time. You will have the opportunity to challenge the IRS claims, and these challenges stop the collection activity. Some people will even choose to take the IRS to court because they cannot collect from you until the judge makes a ruling. This can take years to sort out.
You might be an innocent spouse.
Those of you who are widowed, divorced, or separated and have tax issues because of your former partner may be entitled to innocent spouse relief. This is a way to protect you from the burden of the tax bill. Be sure to bring this up with your attorney to see if they can help you.
You won’t go to jail if you can’t afford the taxes.
Don’t worry, that’s not how it works. Just because you can’t afford to pay the taxes doesn’t mean you will be imprisoned. They will likely put you on a payment plan instead. The people who go to jail for tax issues go because of cheating on taxes.
There are payment options available.
Those who owe taxes have options as to how they can pay back the taxes they owe. For some, they can simply write a check and call it a day. Even if it’s a bit of a financial hit, this is the best option. However, if you cannot afford to pay in full, consider the following:
- Hardship suspension: The IRS can leave you alone for a bit with your account being reviewed every so often. They will check to see if you can pay more easily over time. While this sounds like a good option, keep in mind that interest will continue to build upon your account every day that you don’t pay.
- Installment payment arrangement: In this option, you can make monthly payments towards the amount owed. You will usually need to pay off the amount owed within three years, so keep that in mind. For this process, you will need to fill out a financial statement and essentially receive a bank loan. This method does accrue interest which is compounded daily on your principal amount.
- Bankruptcy: In some situations, you can declare Chapter 7 bankruptcy to eliminate your income taxes. Other chapters allow you to pay off your taxes with little-to-no interest on a payment plan. However, these are complicated laws. We recommend speaking with a bankruptcy attorney if this is something you are considering.
- Offer in compromise: The IRS will, from time to time, be open to negotiating a deal. Sometimes, they will accept a smaller sum up front to cover a larger tax debt. However, if you are looking to strike a deal, you will certainly need an IRS tax attorney’s help. If they accept, your tax liens will be removed and you can start over.
Do not underestimate your tax collector.
Tax collectors have much more power than most federal government employees, and they have very few rules to follow. If you want to make your work with them tolerable, be sure to communicate promptly and thoroughly. If you don’t pay your taxes, they can:
- File a tax lien against you
- Garnish your wages
- Seize and sell your house
- Contact all your friends, family, and employers about your tax liabilities
- Levy your bank account
- Shut down your business
And that isn’t even everything. Be careful.
Contact an IRS Tax Attorney
If you need to help dealing with the IRS, we are the team to call. Tax Law Offices can provide a free consultation so you can tell us all about your situation. From there, we can provide legal counsel for you, should you so choose. Reach out now to get started.