Each year, you may file your tax return with confidence. As an honest person, you may do everything possible to ensure the accuracy of your return. This reduces the likelihood of an issue with the federal or state government.
But even if you believe that you’ve done everything correctly, issues can arise. If you work with a tax preparer, this individual can make mistakes on your return. Likewise, if you file your own return, you may inadvertently make a few mistakes.
There are two types of errors. On one hand, a tax return error can work in your favor, and the federal government may owe you additional money. On the other hand, an error may result in owing additional taxes.
Receiving a notice from the Internal Revenue Service can invoke panic. This is especially true if the agency says you owe money. In this situation, it’s only natural to worry. You may lie awake in bed at night wondering how you’ll pay what’s due, and depending on the severity of the issue, you may be unable to sleep or concentrate at work.
Fortunately, an IRS problem does not have to wreck havoc on your happiness or peace of mind. The truth is, the IRS is more than willing to work with people who owe additional taxes. You might have heard horror stories about liens, wage garnishments and lawsuits. These can happen. However, if you handle an issue sooner rather than later, you can avoid these consequences.
Here are three of the best ways to deal with an IRS dispute.
1. Do not ignore the agency. If you don’t pay your credit card company or another company money, the company may write off the debt and send your account to a collection agency. Although a collection account stays on your credit report for up to seven years, these cases don’t always result in a lawsuit. Therefore, if you ignore an IRS issue, you may feel that the problem will eventually go away.
Unfortunately, the IRS is not a credit card company. As a government agency, the IRS goes to all lengths to get what’s owed from taxpayers. Therefore, ignoring the issue only makes your problem worse. And the longer you ignore the agency, the less likely they will work with you.
2. Call the IRS. In this situation, you need as much information as possible. The letter you receive from the IRS will probably explain the dispute. However, if you have questions, call the number listed on your letter. Be prepared for a long wait. Once you speak with a representative, inquire about why you owe additional taxes. Take notes for your records.
3. Work with a tax professional. To resolve an IRS issue, you may need help from a tax professional. This is especially true if you filed your own return and you do not have an accountant.
Prolonging the issue only makes matters worse. A tax professional knows the tax laws inside and out. Additionally, they have the knowledge to decipher information within the tax return. They’ll investigate the claim and speak with the IRS on your behalf. Also, these professionals are available to answer any questions you might have.
When some people receive a bill from the IRS, they immediately conclude that they owe money, and they pay the agency without asking any questions. However, a tax professional can review all documentation associated with the return and determine whether you actually owe money. In the end, using a professional can potentially save you money. And if the professional determines that you owe taxes, he or she can work with the IRS to set up affordable terms.
Tax issues can be scary and overwhelming. But you shouldn’t let fear paralyze you, nor should you put off the problem for as long as you can. If you get the help you need early, you can avoid legal troubles and move on with your life.