Tax help! How to handle when a small tax debt (under $10,000) is owed

It’s a somewhat painful road to take, but people manage to deal with their own taxes issues when they are under $10,000 and do not need a tax attorney to offer tax help services to them. And so can you. That’s what a person who called me and explained they owed about ~$8,700 in taxes. I gave them a frame work of how he could solve his problem without me  since the tax debt was small. He worked out an installment plan with the IRS and paid his debt off in about a year. The interest rate is compounded (interest on the accumulated unpaid interest and also on the original principal) that will add up, and tax penalties for not paying the taxes on time, so its advisable to pay off the debt quickly. The steps are:

a10-300x300a) Call IRS or state as soon as you realize you can’t repay your tax obligation.

If you filed your tax return, and determined a tax liability, deal with it immediately. Don’t wait. It’s going to make things worse if you don’t. Besides your original tax debt you may end up owning loads of back taxes, tax levies and penalties. Those add up pretty fast! Get ahead of the problem as quickly as possible. If you owe a lot, get tax help from a qualified professional.

b) Please prepare to be patient.

Calling the IRS (or NYS Tax) and actually reaching a human being to talk to will require some time and patience. At times, you may be put on hold for up to about 2 hours to just talk to an IRS representative about your tax issue. And when you get to talk to an IRS rep, more often than not, they will likely be in collection mode, so be prepared and prepare your questions in advance.

c) Make sure you write down the name and number of the IRS Representative  you speak to.

This would help tracing your steps in case of any misunderstandings. Things happen, the first IRS rep he spoke to gave him incorrect information of the amount due to be payed back. A few days later, another IRS rep apologized for the mistake and informed him of a correct $$ (not surprisingly, the amount to be paid off was higher and know included all the interest and penalties).

d) Once you pay off your tax debt, have IRS send you a letter stating that you don’t owe anything else in taxes.

This letter will be your proof that any taxes including interest if any, have been paid off in full. When you write the IRS, or send them anything please save a copy and also send certified mail and return receipt so you have documentation of what you sent them and proof of mailing. When you deal with the IRS, no news is not good news, so it is best to call them on a regular basis if they are not replying to your letter or phone call. If you feel that adequate progress is not being made with your tax issue, you can hire us to help obtain a resolution.