Income tax issues with the IRS are a serious financial problem. This is largely due to penalties and interest accruing over time.
Don’t assume the amount reflected on the IRS notice is the what you actually owe. The Internal Revenue Service does make many mistakes. In fact, it is your responsibility to prove to the IRS what you owe.
IRS Tax Tip: If you did not file a federal income tax return for the year in question, the IRS may have filed what is called a Substitute for Return. A Substitute for Return is NOT A TAX RETURN.
Taxpayers make errors and/or omissions on their income tax return(s), resulting in a superficial tax debt. You want to know what to look for when recalculating your tax return. IRS Code experience is key here. How is your IRS Code knowledge for that specific year?
If after recalculating your tax return, you determine no taxes are owed, congratulations! You just resolved your back tax problem at little or no cost. In addition, the penalties and interest you may have owed, are no longer applicable. All that’s left for you to do, is mail your tax return and follow up with the IRS in a month or so.
If after recalculating your tax return, you can establish that you owe back taxes, proceed to Step 3.
IRS Tax Tip: Form 1040X (Amended US Individual Tax Return) may not be sent electronically. Only original returns may be filed over the internet.
Now that your income tax debt has been verified (Steps 1 & 2), you must evaluate your finances. You either have the money to pay off your income tax debt or you don't.
It is important to note, if paying off your income tax debt creates a financial hardship, you may very well qualify you for an Offer In Compromise.
Since you have the money, you can resolve your back tax issues. Pay off the tax debt as soon as possible. You need to stop the penalties & interest from accruing against your back taxes.
IRS Tax Tip: If your income tax debt is substantial, you should weigh out the cost-benefits of hiring an IRS tax settlement firm.
Proceeding from here will vary from taxpayer to taxpayer.
Tax Debt Owed: is between $1500 ~ $8500 (No Financial Hardships):
With these back tax amounts, we don’t recommend engaging with a tax relief company. It doesn't make financial sense to hire an IRS tax resolution company.
If you owe at least $8500 or more to the IRS, you might want to have an IRS tax professional look things over. Specifically, you want to engage with a tax settlement firm that specializes in back tax resolutions.
I DO NOT Have the Money (Do-It-Yourself):
Obtaining an IRS tax settlement, can be accomplished on your own. When it comes to taxes, the IRS likes individuals to handle things themselves. Why, you may ask?