Many people who think that they are owed a small refund from IRS if they file taxes choose not to file. They assume that the amount they have to pay to file will exceed the amount they get back, and thus not worth all the effort. This isn’t a smart thing to do because there are many times when you may owe taxes and not realize it. If you didn’t file taxes in the past year or two and have been alerted by the IRS that you owe back taxes, it may be scary because you don’t know what to expect. The following guide walks you through a few tips for things that you should do when negotiating with IRS over back taxes to ensure that you don’t pay more than you really owe.
Hire a Professional Tax Consultant
The first thing you need to do is to gather all of your pertinent tax information and take it to a professional tax consultant. The consultant will know the ins and outs of tax filing and may be able to help you find deductions that you didn’t know were available to you. Being able to prove to the IRS that you qualify for certain deductions could lower the amount that you have to pay to them in back taxes. There will be fines and a penalty associated with the back taxes so lowering the amount as much as you can is important.
The tax consultant will need a copy of your W-2, receipts for deductions you think you should be getting, information about your children, business or your home mortgage payments. The interest you pay on a mortgage loan can often be deducted.
Address the Issues Immediately
People who have never dealt with the IRS in the past don’t realize how serious of an issue it can be. You need to address the back tax issue right away before the IRS garnishes your paycheck to get the money that you owe. You need to request proof for the amount that they claim that you owe. This information needs to be sent in a secure way to ensure that they aren’t sending your information to someone who shouldn’t have access to it.
Compare the Information with Your Tax Professional
Once you have the documents in hand from the IRS, you need to meet with your tax professional to compare the information against the tax filing that he or she prepared. Be ready for the information to be different because the IRS isn’t going to include any deductions that you qualify for because it isn’t their job to search for them. The goal of the IRS is to get the taxes that the government is owed, not to help taxpayers pay as few taxes as possible. Your tax consultant will then need to go file addendums to the IRS for the deductions that you want to claim.
Determine What You Can Afford to Pay
Once your tax consultant has figured out exactly how much money you owe to the IRS, you need to figure out how you are going to pay it. If you can pay for it as a lump sum, you should do so in order to avoid paying interest rates or fees for using a payment plan. The IRS knows that most people don’t have thousands of dollars sitting around waiting to be used to pay off taxes. They will work with you to establish a payment plan, but you need to assess how much you can afford to pay before talking to the agent again.
You want to be sure that you take into account all of your other bills for each month and determine how much money you can afford to send to the IRS without having to live in poverty until it is paid off. The IRS often wants to have the taxes that are owed paid off within a few years so they won’t take insanely small payments of $20 to $30 a month. You have to be reasonable when determining what you can pay.
Negotiate with the Agent
When the agent has gotten your addendum from your tax consultant, he or she will then be able to negotiate with you to determine a payment plan. You may have to provide proof of your income and other payments that you have to make each month before the agent can agree to a set payment each month.
Don’t Miss a Payment
Once the agreement has been made on what you are expected to pay each month, you have to actually make the payments. Some people assume that once they reach agreement the IRS won’t come after them for the money. That isn’t the case. The IRS can take money from your paycheck before you even get it or take any tax returns that you have in the future to pay off the debt. Depending on how much money you owe, you could even end up in jail if you fail to pay the debt within the timeline stipulated within the agreement.
Pay off the Taxes in a Timely Manner
You aren’t restricted to paying the exact amount stipulated in the agreement. You can always pay more toward your debt if you have it available. There are fees and penalties associated with back taxes and paying off the debt as quickly as you can will minimize the number of fees that you pay in the long run.
Owing back taxes to the IRS can be overwhelming and scary. It’s important to know that the IRS will never contact you initially by phone or through email. If someone does contact you through these modes of communication claiming that you owe back taxes, it’s more than likely a scam artist and you shouldn’t call them back at all. The IRS typically sends letters in the mail to individuals who owe back taxes stating that they need to call an agent right away. You will have to verify who you are through a series of questions and will be able to talk to someone who knows your case specifically. Never give out your personal information over the phone or by email as it could get stolen and used in a negative way.