Tax problems sometimes arise because you have a complex financial situation or difficulty understanding the tax code. One of the worst things to do is to ignore the problem, because you will have to pay penalties and interest to the Internal Revenue Service. If you have tax problems, the best strategy is to deal with them head-on. You have plenty of options.
Monthly Installment Plan
If you can’t afford to pay what you owe in one lump sum, you can apply for an installment agreement with the IRS online or by talking to an IRS representative on the phone. Request a monthly amount you can afford to pay the IRS until you settle the debt. The agreement also applies to back taxes. If you have problems for more than one year, you can continue to make monthly payments through the installment agreement, adjusting payments for each year with the approval of the IRS. For example, if you already have an installment agreement and the next year you still have difficulties paying your taxes, you can renegotiate your payment agreement.
The Taxpayer Advocate Service, a service of the IRS, offers advice if you experience financial hardships in your business or personal life. Local taxpayer advocates are located in offices in every state. Representatives can also help resolve tax problems not solved through other channels. You might qualify for what the IRS calls an Offer in Compromise, or OIC. You can settle your tax debt for less than what you owe in many cases. You qualify for the compromise only if you cannot make payments through other options. The IRS will review your financial situation and capabilities to reach a settlement.
When You Need Outside Help
If you have a dispute with the IRS because of an audit or past tax returns, you need a tax lawyer. Tax lawyers can represent you during an audit and help negotiate settlements if necessary. They also help in complex legal matters, such as when you start a new business or have changed the structure of your business, which may cause significant tax changes. A tax lawyer can provide assistance if you are an executor of an estate and need advice on estate taxes. For state tax issues, settlements and processes vary from state to state. Check with the National Association of Sate Auditors, Comptrollers and Treasurers to find out the tax regulations concerning your particular tax problems in your state.
Tax Relief Companies
Getting satisfaction through tax relief companies may be a last resort. These companies advertise their abilities to make tax settlements with the IRS on radio and TV as well as online. Many complaints about tax relief companies have been filed with the Federal Trade Commission. Some companies have failed to file the proper paperwork with the IRS, have taken additional fees from customers and have even left some people deeper in tax debt. Reputable companies offer free consultations to discuss your tax issues and develop plans if they feel you need help in dealing with the IRS. Only federally enrolled agents, certified public accountants and attorneys have the authority to represent you when using third-party assistance to negotiate with the IRS. Steer away from companies that want up-front fees and provide guarantees without looking at your information. Check with the Better Business Bureau and locate customer feedback online before accepting help from a tax relief company.
- Federal Trade Commission: Owe Back Taxes? Tax Relief Companies Can Result in More Pain than Gain
- IRS: The Taxpayer Advocate Service is Your Voice at the IRS!
- Lawyers.com: When Do You Need to Hire a Tax Attorney?
- Community Tax Relief: How to Choose a Tax Relief Company
- TaxRelief.net: Tax Relief Companies: How They Work & How to Find the Best Company
- Ryan McVay/Photodisc/Getty Images