If you don’t know how much or what kind of tax burden you have, is it still possible to be in good standing with the IRS? It’s simple to be surprised by an IRS tax bill, but it doesn’t have to happen.
A crucial first step in managing any potential back taxes you may owe is figuring out how much you owe the IRS. But when it comes to the IRS, even a straightforward inquiry can be challenging. Knowing your tax balance is critical to determine whether you owe the IRS money to avoid financial difficulties like income garnishment, liens, and bank account levies.
This blog article describes all the methods you can use to determine whether and how much tax debt you have with the IRS.
You get a bill in the mail outlining how much you owe.
It’s recommended to call the IRS if you get a bill from them. Payment plans and rolling over balances are only two of the many choices the IRS offers to assist you in paying down your debt. If you believe your bill is inaccurate or cannot pay it in full, you should contact the IRS.
A word of advice: check with businesses that provide free tax debt relief consultations if you are confused about dealing with the IRS. This will ensure that you receive the correct guidance and that the necessary tax knowledge and processes are manageable.
You receive a letter from the IRS informing you of unpaid taxes.
They will write to you if the IRS determines you owe them money. Information on the amount owed and how to make payment should be included in the letter. If you cannot pay, call the number on the letter as soon as possible so that someone can assist you in creating a payment schedule.
Payroll or your bank account may be levied.
What is a levy?
A levy is the legal seizure of your assets to pay outstanding taxes to the IRS. Your bank account, as well as/or your wages, may be levied by the IRS.
What does the term “wage levies” mean?
Your employer must withhold a percentage of your pay if they receive a Notice of Levy until the debt is fully paid or released. You should contact the IRS immediately if too much money is being deducted from your paycheck. Before they lift the levy, they may need more time from you to file your return or take other exceptional circumstances into account.
What does having my bank account levied mean?
If there are no assets available for collection through other ways, the IRS may take money straight from any financial institution where you have money (bank accounts) without prior notification or court order (e.g., tax refund offset).
In addition to stating the amount that must be paid, a Notification of Levy also specifies when it must be done—typically, within 30 days of getting this notice from the IRS. Since they can check on your accounts and move forward with the appropriate legal procedures when properties are already involved, tax debt relief organizations are the go-to choice.
- You notice that your debt has been paid off using your tax refund.
Don’t freak out if you discover that your tax refund was used to pay off debt. If you disagree with it, you can contest it, but first, make sure all the other conditions are satisfied. Follow all the instructions in this article to challenge it if they are, and you still want to.
The IRS will send you a letter outlining their justification for using your refund as an offset or collection against the unpaid amount.
If you want to challenge their decision, you have 60 days from the day they sent you this letter (or 90 days if they sent it to you). This is crucial since some people might only know there was a debt owed after their refund had already been deducted. If there is any dispute over whether or not an offset would occur before submitting taxes electronically, it is their responsibility to prove it.
- Get your debt amount by calling the IRS.
A free helpline is available from the IRS. The toll-free number for individual taxpayers is 1-800-829-1040 from 7:00 AM – 7:00 PM daily.
When You Discover That You Owe the IRS Money, What Should You Do?
Paying taxes is the next step after determining whether or not you owe them. Be ready to pay by April 15th if the IRS determines you owe money. Even better, though, is if it’s a lesser sum and you can pay it off earlier than that!
More serious issues, such as the following, may arise if you ignore the agency:
- Interest and penalties
- Garnishments of wages or seizures of property (including your home)
- You might be unable to acquire a car or make major expenditures if your credit is terrible.
- Limits on international travel
Resolutions for Your IRS Tax Debt
- You can seek for payment extension of your outstanding balance.
By the initial due date, you will be obligated to pay the IRS obligation in full or arrange for monthly installments; therefore, you must have the funds available. However, if you don’t, calm down a bit! Just let them know why you won’t be able to meet the present deadline and request a payment extension. Your request will be processed within 20 days (or shorter if possible). Following that, new payment arrangements will be arranged per the data they obtained from your request form.
Depending on how much period is left before your first payment is due, you have three choices: 60 days, 90 days, or 120 days (and beyond) if accepted.
- You can request an Installment Agreement program.
A payment plan established by the IRS called an installment agreement enables you to settle your debt over time in a series of smaller installments.
To be eligible for an installment agreement, you must fulfill the following requirements:
- You cannot be the subject of an ongoing IRS criminal investigation or a current IRS examination;
- Your debt must be under $50,000; and
- You cannot currently be a participant in any alternative collection program or have ever entered into an offer in compromise.
- You can request an Offer in Compromise program.
Finding additional funds to pay off your IRS debt is not particularly desirable if you’ve been trapped in a cycle of financial hardship. It could appear impossible. Be at ease, though!
An Offer in Compromise (OIC), which enables people with significant unpaid tax arrears to settle for less than they owe, is one choice to consider (with some restrictions). To be eligible for an Offer in Compromise, you must demonstrate that repaying your debt would put yourself or your dependents through “undue hardship”—for instance, if:
- You’re now unemployed or working part-time;
- Your inability to repay the whole sum is due to other obligations;
- You owe someone money that your assets aren’t worth; or
- If there are grounds to believe that selling the items that were confiscated during collection operations would bring in more money for creditors than suing them, this is permitted.
You should do the following right away after understanding the amount (if any) owed to the IRS and your available payment options:
- Consult with a tax debt reduction specialist to determine precisely how much is owed and how to manage it financially. Since there is no available education on this subject, having an expert is essential. Additionally, see whether any programs, like an installment agreement plan, are accessible through which one can gradually pay off debt with little or no interest.
- Tax debt relief services can assist you with your taxes and debts. Tax professionals are ready to help if you need to pay off debt or have difficulties submitting your taxes. These experts will ensure your finances are in order so that everything is ready for tax season the following year.
Knowing whether you owe the IRS money is crucial, but there are ways to find out and seek assistance.
You must settle your debt as soon as you know the whole amount you owe. If you start paying later, the IRS may seize your wages or put a freeze on your bank account. In addition to protecting you from the IRS’s aggressive efforts, getting tax debt relief from a registered and reputable firm will also give you expertise in finding the best tax debt solutions.
Keeping track of all your revenue throughout the year is one of the most straightforward strategies to ensure you don’t owe taxes. Knowing your income lets you monitor your monthly spending and determine whether you owe taxes. This can assist you in managing your finances more effectively so that you only spend what you earn.
Knowing the different payment plans like Offer in Compromise, Installment Agreement, and Penalty Abatement will allow you to enjoy a debt-free life. Only allow your debt to go unpaid for a short time if you do and get assistance in paying it off.