How to Handle Overdue Taxes In 2024
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Last updated 04/03/2024 by
SuperMoney TeamEdited by
Summary:
This article outlines essential information for taxpayers facing unpaid taxes, including the IRS’s plan to resume collection notices in 2024 and the availability of payment plans for those owing significant amounts. It highlights the value of professional assistance in dealing with complex tax issues and warns against scams promising unrealistic tax debt reductions. Additionally, it discusses the benefits of simple, transparent tax filing options that offer maximum refunds and faster filing processes.
The IRS will start sending automated collection notices for unpaid taxes in 2024, resuming after a pause due to COVID-19. Taxpayers owed over $120 billion in back taxes, penalties, and interest in 2022.
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Addressing tax debt
If you owe tax debt, acting quickly can save you from further penalties and consequences. You can start addressing your debt even if you can’t pay in full.
How to handle overdue taxes
- File your taxes: Even if you can’t pay, filing avoids additional late penalties.
- Read IRS notices: Understand the details of what you owe to avoid escalation.
- Set up a payment plan: Short-term or long-term plans can make your debt manageable.
- Seek professional help: For complex cases, a tax professional can offer guidance and support.
- Beware of scams: Question any too-good-to-be-true promises for quick debt reduction.
- Consider tax relief companies: In complex cases, they can negotiate with the IRS on your behalf.
| Option | Description | Eligibility |
|---|---|---|
| Short-term Payment Plan | For taxpayers who can pay their debt in a short period. | Owe less than $100,000 |
| Long-term Payment Plan | Installment agreements for extended payment period. | Owe less than $50,000 |
| Professional Help | CPAs, EAs, and Tax Attorneys can negotiate on your behalf. | Complex tax issues or large debts |
| Substitute Returns | IRS-filed returns that can be amended for accuracy. | Failed to file a tax return |
| Scam Awareness | Be wary of too-good-to-be-true promises for tax debt reduction. | All taxpayers |
Why you should file your taxes even if you can’t pay right away
Filing your taxes on time is crucial, even when you’re unable to pay the owed amount immediately. Here’s why:
- Avoiding Penalties: By filing your taxes, you avoid the steep penalties associated with late filing, which can significantly increase your debt over time.
- Payment Plans: The IRS offers payment plans that allow you to pay your tax debt over time. However, you need to file your taxes to qualify for these plans.
- Protecting Your Refund: If you’re due a refund, not filing could mean forfeiting that money. Plus, filing can apply any refund you’re owed against your outstanding debt.
- Legal Compliance: Filing your taxes is a legal obligation. Completing this duty can provide peace of mind and prevent legal complications down the road.
Remember, the IRS is more flexible with individuals who file their taxes but can’t pay immediately than with those who fail to file at all. Taking action by filing can open up avenues for managing and eventually resolving your tax debt.
If you get a notice, read it
Ignoring IRS notices can lead to severe actions like tax liens and wage garnishment. Opening and responding to notices can prevent these outcomes.
Set up a payment plan
The IRS acknowledges that not everyone can pay their tax bill in full and immediately. To accommodate this, it offers both short-term and long-term payment plans based on the amount owed.
Short-term payment plans are available for those who owe less than $100,000 in combined tax, penalties, and interest.
Long-term payment plans, or installment agreements, are designed for taxpayers owing less than $50,000.
For taxpayers classified as low-income, the IRS may waive or reimburse the setup fees associated with these plans, making it easier for those in financial hardship to manage their tax debts.
Contact a professional
Tax issues can sometimes become too complex for individuals to handle alone, especially when large debts are involved or when navigating the intricacies of tax law.
Certified Public Accountants (CPAs), Enrolled Agents (EAs), and Tax Attorneys are professionals qualified to assist with tax matters. They can offer advice, represent taxpayers in front of the IRS, and help negotiate payment terms or debt reductions.
Dealing with substitute returns
Failing to file a tax return prompts the IRS to create a substitute return on your behalf. These are rarely advantageous to the taxpayer.
A professional can review a substitute return and recommend amendments to ensure you’re not overpaying. They can also assist in filing past due returns correctly.
Beware of scams
The promise of drastically reducing tax debt quickly is a common tactic among scammers. Genuine tax resolution involves negotiation with the IRS and is neither quick nor guaranteed.Taxpayers should approach offers that seem too good to be true with skepticism and seek advice from reputable professionals.
Low-cost assistance
Seeking help for tax-related issues doesn’t always have to be expensive. There are several avenues available for taxpayers who need guidance or assistance but are concerned about the cost. Two notable options are the Taxpayer Advocate Service and Low Income Taxpayer Clinics. Both provide invaluable services to those who qualify, ensuring that everyone has access to the help they need to navigate their tax obligations.
Taxpayer advocate service (TAS)
The Taxpayer Advocate Service is an independent organization within the IRS designed to help people resolve tax problems they can’t solve on their own. It offers free assistance to individuals, businesses, and exempt organizations. If you’re facing a tax issue that affects your financial situation, or if you’ve tried and failed to resolve a tax problem through normal IRS channels, the TAS might be your best option. They can offer guidance on a wide range of issues, from audit disputes to identity theft cases, and their services are always free.
Low income taxpayer clinics (LITCs)
Low Income Taxpayer Clinics are another critical resource for those who need tax help but cannot afford high-priced tax professionals. LITCs provide free or low-cost assistance to low-income individuals who have a tax dispute with the IRS. These clinics can help with audits, appeals, and collection disputes, and can also provide assistance with tax return preparation in certain cases. LITCs are staffed by tax professionals, including attorneys, accountants, and enrolled agents, who volunteer their time to help those in need. To qualify for assistance, taxpayers must have income below a certain level, which varies by location.
Tax relief companies can help with complex tax debt cases
When faced with complicated tax debt situations, navigating the IRS’s maze can feel daunting. Tax relief companies specialize in offering a lifeline. Here’s how they can assist:
- Expert Negotiation: Armed with experienced tax professionals, these companies can negotiate with the IRS on your behalf to settle tax debts, often achieving arrangements that might not be accessible to individuals.
- Payment Plans: They can help set up manageable payment plans that align with your financial situation, reducing the immediate financial burden.
- Offer in Compromise: In some cases, tax relief firms can arrange an Offer in Compromise, allowing you to settle your tax debt for less than the full amount owed if you meet the IRS’s strict criteria.
- Penalty Abatement: If you have reasons such as illness or misinformation for not complying with tax laws, they can request penalty relief, reducing the total amount owed.
- Protection from Collection Activities: While working on your case, they can often halt collection activities, giving you peace of mind as you work towards resolving your tax issues.
Choosing a reputable tax relief company is crucial. Look for firms with certified tax professionals and check their track record for successfully helping clients with similar issues.
Key takeaways
- The IRS will resume sending collection notices in 2024, emphasizing the importance of addressing unpaid taxes promptly.
- Payment plans are available for those owing less than $100,000, with options for short-term or long-term arrangements.
- Professional help from CPAs, EAs, or Tax Attorneys can be crucial in navigating complex tax issues and negotiating with the IRS.
- Scams promising quick tax debt reduction are prevalent; taxpayers should remain vigilant and seek reputable advice.
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