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Will the IRS Spoil Your Summer?

July 06, 2016  |   Tax News   |    

Ideally, you’ll spend your spare time during the long summer months with trips to the beach, barbeques and naps in the backyard. Whatever your plans, though, there’s always the chance something unexpe7.6.2016 Summer Functed will spoil your fun. If you find out you have a tax debt, it may be a long, hot summer indeed.

While you may assume that the close of tax season signals a time to relax until your next filing adventure, the IRS is just getting started with their duties. Should a problem be discovered with your tax return, summertime may be the first you hear about it. How you handle an IRS issue can make or break the rest of your year.

Potential Problems

There may be no reason to worry about a notice regarding a tax debt. If your return was filed on time and you paid any liability by the due date, you may be one of the millions of taxpayers who will get to enjoy the dog days unfettered by letters from the IRS. However, if you did make a mistake on your return, there are a few things that you’ll want to prepare for.

First, the IRS will assess a balance in the event that you underpaid tax. Although there are numerous ways this could happen, here are a few of the more likely scenarios to consider:

  • You made a simple arithmetic error which resulted in you paying less in tax than you should have
  • Extra revenue you earned last year accidentally went unreported; examples include side work income, gambling winnings, a forgiven debt or a monetary award from a court judgment
  • You claimed ineligible dependents
  • Your tax return was never actually filed and the corresponding tax bill never paid

Chances are, you know very well whether or not you completed your tax return. In the event that you overlooked this important task, you’ll want to get it handled as early as possible. If a tax debt has already been assessed, there are few items to handle right away.

Tax Debt Duties

If addressing an IRS issue does appear on your summer chore list, there are some essential details to keep in mind:

  • Make sure the IRS notice is accurate, taking care to review your own tax records to ensure no mistake has been made
  • Note the date by which you must respond; this will be found on your notice
  • Remember that any tax debt generates both penalties and interest, which will increase the total you must pay the longer you wait
  • Understand that you don’t necessarily have to pay the entire tax debt at once, despite the fact that the IRS will instruct you to do just that

If it’s within your means, you’ll want to satisfy your total debt up front. This will cut down on the costly interest charges and penalties that accrue each month. Additionally, paying your delinquent tax bill will prevent you from enduring IRS collection activity, which can include a wage garnishment or tax lien.

However, if you don’t have the ability to remit a full payment, you may want to contact a licensed tax professional. Such an individual can propose and execute an alternate tax resolution, one amenable to the IRS and conducive to your budget. Taking charge and resolving your IRS issue early on can ensure that a summertime tax problem doesn’t compromise your fall and winter plans.