With April 15th having come and gone, you're no doubt breathing a sigh of relief (assuming you filed by the deadline, of course). But even though the sun has set on tax season, the IRS never stops working. Why this should concern you is a mystery until you open your mailbox one bright, sunny afternoon and find an official government notice peeking back. It won't bite, but it's likely to ruin your day.
If you've never had a tax problem before, you may not be aware that issues are often assessed long after you file your return…sometimes delayed by a couple of years. At the earliest, though, you may receive notice within a few months. What it will say depends on precisely what issue the IRS has with your tax return. No matter the message, though, there are a few basic measures to ensure a swift resolution.
Your first instinct may be to shred or trash an IRS letter without ever looking at it. Don't. This will not make the problem go away. Keep in mind that the IRS may merely want you to clarify information on your return. Even if it is a notice of an assessed balance, it's not the end of the world. Whatever happens, keep your wits about you and proceed cautiously.
You'll be asked to respond to the request for information, or perhaps prompted to contest a proposed liability. Carefully review your records for the tax issue in question and consult with a tax professional, if necessary. You may immediately understand why the IRS has reached out to you; if this is the case, respond promptly and accurately. Failing to reply will only invite further IRS correspondence and won't bring you any closer to resolving the matter.
Assessing the Situation
If there is a balance due and it is accurate, you'll have to determine how to handle it. Your best course of action, if it is within your means, is to simply write a check for the full amount. Any balance owed to the IRS increases monthly with additional penalties and interest. The longer you wait, the more you pay. Alternatively, the balance may be more than you can comfortably handle at once, or at all. If this is the case, you'll want to explore repayment options.
The IRS wants you to pay as quickly as possible, but they will accept a structured agreement, if necessary. You will more than likely qualify for an installment agreement, allowing you to pay back your debt over a period of months or even years. The penalties and interest continue to accrue, however, so bear that in mind when you're considering the terms of the agreement. If you're completely unable to pay anything toward your balance, you may qualify for Currently Not Collectible Status. This prevents the IRS from taking collection action against you until your financial situation improves.
Seek Professional Assistance
Negotiating with the IRS over payment plans and what you can actually afford can be tricky. It may be in your best interest to seek the assistance of a licensed tax professional. Reputable tax resolution companies offer free consultations, so there's no harm in getting a second opinion. Ultimately, having a professional handle your case may be your safest bet for a smooth resolution. Remember, just because you have a surprise tax debt doesn't mean you can't respond with a certain amount of preparedness.