Maybe you were incredibly busy that year and filing your taxes just slipped your mind. Maybe tragedy had recently struck—you lost a loved one to cancer or you were going through a tough divorce—and the thought of dealing with money matters was just too much. Or maybe you recently bought a new home and aren’t used to paying property taxes. Whatever reasons you gave yourself for failing to file or pay your taxes, the result is always the same: the IRS wants its money. It doesn’t care about circumstance and reasons. It cares only about balancing its ledger, and that means, sooner or later, they will come after you and the money you owe.
Sound fun? We didn’t think so. The moral, of course, is to stay on top of your taxes, pay them on time, and refrain from taking risks like choosing not to report money earned through self-employment. We realize, however, that you’re likely past that point if you’re reading this article. So, what should one do if already in hot water with the IRS? Read on and we’ll break it down for you.
If you haven’t received a letter from the IRS yet, you will. And that first letter will invite you, in rather friendly terms, to help them clear up what seem to be discrepancies relating to your taxes. This, dear readers, is the time to act. Contact the IRS right away, acknowledge that there are in fact discrepancies, and work out a plan to pay them what you owe. This will make the IRS very happy, and a happy IRS makes for a happy life. Trust us.
Now, perhaps you’re past that point. You got that friendly letter, stared at it for a moment, felt worried, and then threw it in the trash, hoping the whole thing would magically go away. Maybe months have gone by without another letter and you’re feeling pretty good about your chances. The IRS forgot about you, you’re telling yourself. Or maybe you think you’re not a big enough fish for them to bother coming after you. You’re wrong on both counts. It truly is only a matter of time.
Eventually, you will get another letter, and this one won’t be as friendly as the last. You’ll also notice that, in addition to the back taxes you owe, you’ve now been hit with fines. If you’re already in debt, this probably sounds especially fun. These fines will only increase the longer you wait to resolve matters. In fact, from here on out, the letters you receive will become increasingly menacing and the fines even steeper until, eventually, the IRS will begin to garnish wages and threaten liens on your property. If you let it go long enough, they’ll even file criminal charges against you. Yes, it can, and often does, get that serious.
So, we’ll say it again. Avoid all of this by filing all necessary tax information each year and paying whatever money you owe. Doing so will allow you to avoid the financial quicksand of increasing fines and the prospect of jail time. However, if you do already find yourself in dire straits with the IRS, consider hiring a professional to help you succeed with an offer in compromise. For the best outcome, you’ll need someone well-versed in tax law and experienced when it comes to negotiating with the IRS. Such a professional will keep you out of jail and get you the lowest payment possible.