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How to Solve a Tax Problem in 4 Easy Steps

Studies show the majority of Americans who owe money to the IRS think it’s no big deal. It isn’t if you make sure you keep up on your payments.

What if you don’t?

If you’ve ignored those letters from the IRS for too long, you have a tax problem. These issues will affect your income, quality of life, or worse.

Tax problems are so common they might not seem important. They are. Minor problems develop into major problems over time, so it’s best if you take care of any IRS issues as soon as possible.

Do you need help figuring out how to solve your tax issues? Read on to learn more about the four steps for tax relief.

Step 1: Open the IRS Letters

Even if you don’t expect there to be a problem, a letter from the IRS is always something that should cause concern. These days, however, Americans receive so much junk mail, any official-looking letter is easy to throw away.

People ignore these letters out of financial concerns, too. If you work for tips or as an independent contractor, it’s unfortunately too easy to get behind on your payments.

The first step to solving IRS tax problems is to figure out what your problem is and the scope of the issue. Here are some of the most common problems.

Return Accuracy

This means an audit or an underreporting notice. If the IRS thinks you underreported your income on your tax returns, you likely face an investigation.

Underreporting isn’t always done on purpose and with ill intent. If you prepare your taxes, it’s possible you made a simple accounting or math error.

Payment Owed

There are many industries where people owe money to the IRS at the end of the year. A great example is front of the house restaurant workers, like servers and bartenders who take home cash.

While most of these workers want to be responsible and set aside money for their taxes, life often gets in the way. When they file their tax returns, they owe thousands of dollars they might not have.

Lack of Filed Returns

You might think you can stay ahead of the IRS if you don’t file your returns. It is, after all, a giant bureaucracy.

Yes, you can go for a while without filing returns. The IRS will catch up to you in the long-run.

Account Discrepancies

Your account information might not match what the IRS has on record. This could mean an issue with your payments or returns, or an identity theft issue.

Step 2: Get Compliant

Once you figure out the severity of your tax issues, you can then determine whether you need lawyer help for tax relief. Whether the issue is minor or major, seeking tax problem help from an attorney guarantees resolution.

Compliance is a major step to tax problem solving for one reason. The IRS wants to know you will put forward a good-faith effort to pay what you owe or work with them to solve any other issues.

You achieve compliance with the IRS by communicating. That means responding to their letters and doing everything you can to let them know you’re willing and able to resolve this issue.

Compliance achieves two things. It gets the IRS off your back. Even if you owe massive sums of money, you’re far less likely to face severe penalties if you’re in communication and following their instructions.

A show of compliance also brings leniency. The IRS will take your current financial situation into account if you’re upfront and in communication with them.

Step 3: Organize and File Returns and Other Paperwork

Once you and your tax attorney communicate your compliance, the IRS will often grant a hold on collection. This hold is meant to give you time to organize and prepare all pertinent paperwork.

This is where your lawyer will be so crucial. If you’ve not filed your tax returns for several years and lost important paperwork like your W-2s, your attorney can help you apply for new copies.

Once your attorney receives these important forms, they can then file all of your outstanding returns including tax and penalty.

If your problem is lack of payment, this is the step where your tax attorney files the paperwork and negotiates a payment plan with the IRS.

Should your financial situation require a payment plan of longer than six years, expect a tax lien.

Step 4: Stay in the Clear

Tax return problems happen. Once you’ve reached an agreement with the IRS and work with a lawyer to resolve your issues, you need to stay in the clear.

This means making consistent payments on time and communicating with the IRS if you suffer any unforeseen financial issues. It also means filing your tax returns on time, every year, even if you will owe more money.

The IRS will add what you owe on future returns to the balance of your payment plan. Failure to file or failure to pay will nullify any agreement you and your lawyer negotiated with the IRS.

Should you nullify your agreement, don’t expect the IRS to show any leniency.

Resolve Your Tax Problem ASAP

You need to solve your tax problem. Ignoring a problem doesn’t mean it goes away. Those letters are so easy to ignore, and you can outrun the IRS for only so long until they catch-up with you.

Should you receive an IRS notice, open it immediately and determine what issues you face. If the tax problems are too complicated to handle on your own, consult an attorney. They can get you on the right path to resolution.

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