If you’ve received a notice from the Internal Revenue Service (IRS) that you owe money, you’re not alone. Many people find themselves in this situation, but it’s essential to know what to do next. The IRS is responsible for collecting taxes and ensuring that everyone pays their fair share, so ignoring the notice is not an option. In this article, we will provide you with a guide on what to do when the IRS says you owe money.
Understand Your Notice
The first step is to understand the notice you received. The IRS sends different types of notices, and each notice has a specific purpose. It’s essential to read the notice carefully and understand what it means. The IRS may send a notice for several reasons, such as:
- You didn’t pay the full amount of taxes you owed.
- The IRS made changes to your tax return, which resulted in additional taxes owed.
- Your tax return was selected for an audit, and additional taxes are due.
It’s crucial to know the amount you owe and the reason for it. If you don’t understand the notice, you can call the IRS phone number provided on the notice. The IRS will explain the notice and answer any questions you may have.
Once you understand the notice, you can start taking action to resolve the debt. It’s important to act quickly because the IRS charges penalties and interest for unpaid taxes. The sooner you resolve the debt, the less you will owe.
Assess Your Options
Once you understand the notice and the amount you owe, the next step is to assess your options for resolving the debt. The IRS offers several options to help taxpayers pay their debts, including payment plans and offers in compromise.
A payment plan allows you to pay your debt in installments over time, making it easier to manage your finances. You can apply for a payment plan online or by mail using Form 9465. The IRS will review your application and determine if you qualify for a payment plan based on your financial situation.
An offer in compromise allows you to settle your debt for less than the full amount owed. To qualify for an offer in compromise, you must demonstrate that you can’t pay the full amount of taxes owed, even with a payment plan. You can apply for an offer in compromise online or by mail using Form 656.
When assessing your options, it’s essential to consider your financial situation and ability to pay. You don’t want to agree to a payment plan or offer in compromise that you can’t afford because it could lead to further financial difficulties. Seeking professional help from tax attorneys or accountants can help you navigate the options available and determine which is best for you.
Respond to the Notice
It’s crucial to respond to the notice in a timely manner. Ignoring the notice will not make the debt go away and can result in additional penalties and interest. The IRS expects you to respond within 30 days of receiving the notice.
To respond to the notice, you can submit a payment for the full amount owed or request a payment plan. You can apply for a payment plan online or by mail using Form 9465. If you can’t afford to pay the full amount owed, you can request an offer in compromise. You can apply for an offer in compromise online or by mail using Form 656.
If you’re unable to pay the debt in full or enter into a payment plan or offer in compromise, you can still contact the IRS to discuss your options. The IRS may be able to temporarily delay collection efforts or reduce the amount of penalties and interest owed. It’s essential to communicate with the IRS and work towards resolving the debt to avoid further consequences.
Now that you understand your notice and assessed your options, it’s time to take action. There are different steps you can take to resolve the debt, depending on your financial situation. One option is to negotiate with the IRS to set up a payment plan. You can request a payment plan online, by phone, or by mail. The IRS will review your request and determine if you qualify for a payment plan.
Another option is to make an offer in compromise. An offer in compromise is an agreement between you and the IRS to settle your tax debt for less than the full amount owed. However, not everyone is eligible for this option, and it’s essential to seek professional help from a tax attorney or accountant.
Once you have agreed on a plan with the IRS, it’s crucial to follow through with it. Failure to pay your taxes or follow the agreed-upon payment plan can result in severe consequences, such as:
- Wage garnishment
- Bank levies
- Seizure of assets
- Liens on property
- Legal action
Receiving a notice from the IRS that you owe money can be a stressful and overwhelming experience. However, it’s essential to respond to the notice promptly and take action to resolve the debt. In this article, we have provided you with a guide on what to do when the IRS says you owe money. Remember to understand your notice, assess your options, and take action to resolve the debt. If necessary, seek professional help from a tax attorney or accountant.
At Wiki Mic, we believe it’s crucial to stay informed about taxes and finances. If you have any questions or need more information, please visit our website. Don’t let unpaid taxes cause unnecessary stress. Take action today and resolve any debts owed to the IRS.