If you have outstanding tax payments, you are probably wondering how best to resolve your debts and avoid any penalties. This is often easier said than done. Handling tax debts can be a delicate matter, and a wrong step can make your situation even more complicated.
It is important to know the mistakes that you should avoid when when it comes to handling your tax debts. To help you navigate this complex situation, we have created a list of what not to do if you owe back taxes.
Don’t neglect a payment plan
You may be wondering how it will be possible to pay the full amount of taxes that you owe. Combined with penalties and interest, the sum may seem overwhelming. Fortunately, the IRS does work with taxpayers to set up payment plans. Once you enter into a payment plan, you will be in good standing with the IRS as well as most state taxing authorities. The sooner you enter a payment plan, the better: There will be less interest to pay, and your assets will not have a tax lien placed on them.
Don’t necessarily accept a substitute return
The IRS frequently files substitute tax returns for people who have not submitted their own returns on time. You can accept this return if you wish, but it may not be your best option. The IRS does not include deductions or exemptions in substitute returns, so you may be paying more taxes than necessary. You can instead file your own returns for the missing years and decline to accept any substitute returns.
Don’t ignore the IRS
No doubt you have received several pieces of mail from the Internal Revenue Service reminding you of your outstanding debts. Even if you find these notices obnoxious, you should do your best to respond to them promptly. Failing to respond to the IRS’s notices could result in serious penalties further down the line. Rather than ignore your circumstances and watch your debt grow, consult a skilled tax attorney who can help you work with the IRS to resolve your tax issues.