How to Save Money on Taxes

How to Handle IRS Back Taxes

Because tax debt is so common in America, people have a tendency to put it off. They pay their mortgages and credit card bills religiously, but the letters from the IRS go into the drawer, often unopened.

Then one day a dour man in a dark suit knocks on your door and tells you that you owe tens of thousands of dollars to the IRS. It happens every day in America.

IRS Back Taxes

The Internal Revenue Service is both the most brutal and the most lenient collection agency on earth.

How can they be both? Because they give taxpayers time to pay their bills. Instead of assessing immediate fines and penalties, they often give them an opportunity to make good on their tax debt. But after they miss a payment or two, that good will goes out the window.

Compared to credit card companies, the IRS has patience. But that is only because they have supreme confidence in their ability to collect the monies owed them. The credit card company, on the other hand, panics because it knows its debts are unsecured, which means it will be left holding the bag if the cardholder cannot pay.

IRS back taxes are secured debts.

This means the IRS has the legal right to seize your assets in order to recover them. Just about anything you own is fair game. Your house, your car, even your bank accounts can be confiscated. The IRS has absolutely no compunction about seizing the personal possessions of anyone who owes them money and selling them at public auction.

Where to start?

If you have a deep, dark drawer filled with IRS notices, empty it out and take the time to read over every last letter. Ignoring the problem will only make it worse, i.e., more expensive. The fines and fees associated with delinquent IRS accounts can put anyone in a financial hole in a trice. Celebrities and sports stars alike have lost everything they owned and even been imprisoned because they avoided the IRS for years. Now imagine what they will do to you, an ordinary citizen!

Contact the IRS

Benjamin Franklin once said that nothing was certain in this world, except death and taxes. He was right. The IRS might take its sweet time, but they will eventually come for you. And if you have been ignoring their letters, they may not be amenable to any deals you may have devised. That is why it is always a good idea to contact them before they contact you. If you can show them that you are serious about paying your IRS back taxes, they may treat you more fairly.

Hire A Tax Advisor

Most tax debtors do not feel comfortable dealing with the big, bad IRS on their own, so they often hire tax advisors. A talented tax advisor can be of enormous benefit to befuddled taxpayers who don’t know the tax code from a hole in the ground. Because they can negotiate on equal footing, they may be able to arrange for a payment plan for taxes. This agreement will let you pay your tax debt off gradually, in monthly installments. And if you qualify, a tax advisor may even be able to help you settle a tax debt.

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