Your Tax Debt, Simplified

Receiving notice of a tax debt can provoke several reactions: alarm, stress, anger and – perhaps worst of all – confusion. Although the complexity of our tax code has become the stuff of satire, you certainly won't be laughing when you're trying to make sense of your assessment. And since you have little time to act before responding and avoiding IRS collection action, keeping your wits about you becomes essential.

A little knowledge can go a long way in priming yourself for any tax debt you might incur. While the exact details of your liability may be unique, there are some generalities to any IRS notice that make a big difference to you and your finances. Understanding a few principle elements now can save you precious time and sanity if you end up having to weather the worst.

What an "Assessment" Means to You

When the IRS makes an assessment of debt against you, they have actually determined that you owe taxes that should have been paid at some point in the past. Typically, you'll receive a Notice of Assessment within a few months of a reporting error. So, if you underpaid your taxes on April 15th by $200, you should – in theory – hear from the IRS before you start your Christmas shopping. But it doesn't always work out that way.

Since the IRS has reported budget and staffing deficiencies, a backlogged Notice of Assessment may not reach you until a year or more after you've filed. This naturally complicates matters for you, particularly if you've filed another return since the one in contention. Nevertheless, you'll want to open your notice straight away and begin reviewing key information.

The Tax Year in Question

You've opened your letter from the IRS after resisting the urge to panic, and you're now ready to begin sorting out all the details. The first thing to look for is the tax year that is being assessed against. Keep in mind that you file for the previous tax year each filing season. If the IRS has assessed a debt for tax year 2014, you would have filed the return in 2015. Once you've identified which year has been assessed, you'll want to locate your corresponding tax return.

Scrutinizing Your Assessment

You can't ever assume that the IRS has correctly assessed your balance. While their calculations may be accurate, you'll want to compare them with information listed on your tax return. If your reporting income doesn't match, for instance, the IRS may simply need to amend these details on their end (your notice will provide instructions on how to contest an assessment). Similarly, you'll want to confirm that all of your personal information, such as your name and address, correctly match the IRS' records. Verifying these simple but important details can ensure you don't write a check for an invalid assessment.

Simplifying a Resolution

In the event that your notice turns out to be accurate, you'll want to resolve your tax debt as quickly as possible. A simple solution for you to do just that will be to consult with a tax resolution company. A licensed tax professional can take the stress of your debt out of your hands and present you with a fast, formal resolution. No matter what tax issue you're facing, a simple solution is just a phone call away.

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