What are the top five steps to take if you owe tax debt?

It will only be a few months before the new year, which means it will be time to start preparing to file your federal income tax return with the Internal Revenue Service (IRS) for the 2011 tax year.  When you calculate your federal income tax, you could be one of the many who find that you owe additional tax.  When this happens, what should you do?

Following are five things you should keep in mind when you owe a tax debt to the IRS.

Obtain help from a professional tax preparer. Did you obtain help from someone when you calculated your income tax, either a Certified Public Accountant (CPA) or another professional tax preparer?  If you did not, you should have a tax preparer check your work.  There is the possibility that when you calculated your taxes and found that you owed money, you made a mistake.  You could have left out a deduction or made other errors that led to you owe more money than you should owe or that may prevent you from getting a refund due to you.  And depending on the mistake, it is not likely that the IRS will find and correct the mistake for you.  Therefore, be sure your taxes are correct if you find you owe money.

File your tax return. Once you complete your tax return, you need to file it, even if you owe money and cannot afford to pay it.  The IRS will charge you interest and a penalty when you file your tax return and fail to include a payment for the tax you owe.  But if you do not file your tax return at all, the IRS will charge a much larger interest rate and penalty on the unpaid tax balance.  Therefore, it is in your best interest to file your tax return on time and then work out a strategy for paying the tax liability due.

Pay the tax you owe. If you owe tax to the IRS, it is in your best interest to simply pay it when it is due on April 15 if you can afford to do so.  As noted above, delaying payment of your tax will generally result in you still having to pay the tax you owe in addition to interest and penalties charged by the IRS.

Contact the IRS. If you cannot afford to pay the tax you owe, you should contact the IRS.  The IRS has several options to work with taxpayers who cannot afford to pay their taxes in one lump sum, including a payment plan and an offer in compromise.  But to even be considered for one of these payment options, you must file your taxes and work within the IRS’ system for applying.

Hire a tax attorney. If you owe money to the IRS you cannot afford to pay, a tax attorney will be able to help you.  A tax attorney has training and experience with tax matters, including working with the IRS.  An attorney will be able to help evaluate your specific tax situation, if you are likely to qualify for one of the IRS’ payment options for settling your tax debt, and if you do appear to be a candidate, helping you complete the application to increase the likelihood that the IRS will accept it.

How can I get help from a tax attorney?

If you complete the short form below, a tax attorney can review your tax issue free of charge.  This review is completely confidential and does not obligate you to anything further.  So take advantage of this change to get help in addressing the taxes you owe.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.