Receiving a tax bill letter from the Internal Revenue Service (IRS) can make you feel overwhelmed. Things start getting complicated when these letters start piling up. More letters mean the higher the arrearage you are under. Therefore, under such pressure, you are prone to make rash decisions and this is what will throw you under the bus.
The first thing to do upon receiving an IRS letter is to stay calm and read it thoroughly. Contact a tax relief services professional and seek their help for further proceedings. The biggest mistake is to think that if you do not reply, they will stop sending the letters. In reality, the penalties will increase when you do not respond to the tax liability notices timely and appropriately.
To save you from panicking and making any wrong decisions, we have compiled a list of common mistakes to avoid upon receiving an IRS audit letter. Follow these and see how calmly you will respond to the next tax liability letter you receive.
7 Tax Liability Relief Mistakes To Avoid
Responding wrongly to the tax arrearageletter from the Internal Revenue Service is one of the wrong moves that you can make. Moreover, if you do not respond at all, then it is like accentuating the problem for yourself. So, let’s get an insight into the mistakes to avoid upon receiving an IRS tax liability letter.
1. Waiting for The Problem To Go Away
Once you are owe money to the IRS, you cannot get rid of it unless you pay the amount. If you think that avoiding the letters will make the problem go away, then you are thinking wrong. Even if they do not send a follow-up letter, it does not mean that they will not inquire.
The IRS has to contact thousands of Americans and so following up with you might take a while. However, they will eventually contact you. It is also important to note that the longer the time passes, the higher the penalties will be. Hence, it is sensible to respond to the IRS letter in due time and pay the tax amount you owe them.
2. Not Weighing All Installment Options
If you are under huge tax arrearage, installments seem a feasible option. The installment agreement is an agreement signed between the IRS and the delinquent taxpayer to pay the taxes in installments. This way you can pay the amount in parts without getting bankrupt. However, here you can make the mistake of settling for an expensive installment option.
The best way is to contact a tax professional and seek their advice on the matter. They will guide you regarding all the available options and help you choose the one that fits your situation. Therefore, when you are given an installment option by the IRS, do not agree to it immediately unless you have gone through all your options. This is because the installment involves the interest rates too and can be pretty expensive.
3. Believe The Scammers
When you are in arrearage to the IRS, and thinking of seeking professional help, there will be many companies who will try to scam you during such times too. These will contact you via social media or texts or even emails and make unrealistic promises.
They may tell you that they will waive off all your taxes, or that they can settle your arrearage with the IRS in just a matter of minutes. Do not fall for any of these. Such companies will only scam you and don’t provide realistic solutions. The IRS has its own way and timeline for tax relief and there is no shortcut to it. Therefore, do not fall for any such companies, and make sure you follow the right protocol for tax payment.
4. Doing Everything Yourself
You are not a tax professional and there is a high chance that you will be unable to understand the jargon of a tax liability letter from the Internal Revenue Service. Therefore, the best way is to contact a tax professional.
They will not only explain everything to you in layman’s terms but also tell you the options you have. It is good to hire a tax professional instead of making the wrong decisions and then paying a very high tax liability amount. The process is quite long and involves a lot of paperwork. Even a small mistake can put you in hot water. Therefore, the best decision you can make is to hire a tax professional and make all the proceedings smooth.
5. Not Filing On Time
Not filing your tax returns on time lowers your credibility in the eyes of the IRS. Even if you do not have enough amount to pay your taxes, you should at least file them on time. This way you might get an extension from the IRS but at least they will know that you intended to pay your taxes in time.
6. Hiding Information
The worst thing you can do is to hide documentation and other information from the IRS. This will not only lower your credibility but also make them suspicious of you in the long run. It is not like the IRS cannot get hold of all your data. They can do so with just a click and therefore the contradictory information will put them in suspicion to run a thorough check on you. This might uncover many loopholes leaving you in a far worse situation.
7. Not Responding Timely
When the IRS sends you a letter, you should respond to it on an immediate basis. The response should be well weighed and as per instructions but it should not take long. This is because if you do not respond on time, penalties will increase. Therefore, if the letter requires an answer, it is good to respond in due time.
Bottom Line
The letters from the IRS are not always scary. Even if you have a tax liability that can be settled easily too. Make sure you seek professional help and respond appropriately. Going with the process and working calmly will bring you out of such arrearage issues easily.
Also read: IRS Tax Debt Relief Program: How to Resolve Your Debt with The IRS?
