Most of the time, handling your taxes is pretty straightforward. Every now and then, though, you may run into a problem with the state or IRS that requires extra attention. How do you know if your issue is something you can manage yourself or warrants professional assistance?
It's commonly understood that the Internal Revenue Service is exacting when it comes to the tax information you provide and what you're paying in. Naturally, it's in your best interest to proceed with caution when it comes time to prepare your taxes, or if you're confronted with notification of a problem. In many cases, you'll want to consult with an experienced, licensed tax professional rather than tackling the situation alone. Take a look at these warning signs before you set upon a collision course with the IRS:
Notice of Assessment
Even if you took extra care in preparing your tax return, the chance exists that the IRS found a mistake. And while you would hope that such an error wouldn't mean a sizable bill, you may wind up with just that. A notice of assessment is a determination of what you should have paid in taxes, which will likely be due immediately. If you feel that such an assessment was made in error, or it's more than you can comfortably pay, you should talk to a tax resolution company. A licensed professional will provide you with options and, if necessary, can deal with the IRS on your behalf.
In the event that you've taken a break from filing for the last year or two, there's no better time than now to catch up. The problem you may run into is incurring a balance that follows your late filing. By definition, any liability that is unpaid after the original due date is a tax debt. What this means for you are added penalties and interest, on top of what you should have paid to begin with. In some cases, it may be possible to get these penalties and interest fees removed, or at least reduced. A licensed tax professional can help you catch up without necessarily wiping out your finances in the process.
Amending Your Return
If you are missing a tax return, the IRS may file for you with a Substitute for Return (SFR). This will not be to your advantage, as the IRS is working with limited reporting information. If you were able to take certain deductions that would have reduced your tax liability, for instance, these will not be included on an SFR. In a nutshell, you may be asked to pay more than you have to. In order to get this corrected, you'll want to enlist a tax resolution company to help you get the biggest bang for your buck with credits and deductions. Similarly, such an organization can amend any returns that had mistakes which led to a tax debt.
Wage and Bank Garnishments
More than likely, if the IRS garnishes your paycheck or bank account to satisfy a tax balance, you've been getting notices for some time. However, there is a chance that the IRS does not have your most current address on file. The fact that you don't actually receive notices does not prevent the IRS from taking collection action against you. If you're informed that your bank account has been levied, you have a very small window of time to straighten it out with the IRS (usually 21 days). A licensed tax professional can work directly with the IRS to get this handled, and can also see about lifting a garnishment on your wages.
Paying Your Tax Debt Isn't an Option
There is a chance that you'll be informed of a tax debt at the worst possible time, when you can't afford to pay anything toward it. You may be eligible for Currently Not Collectible (CNC) status, meaning the IRS acknowledges your financial situation and suspends collection efforts against you. This is a temporary fix, but can allow you time to get your finances in order. An experienced tax relief company can help you obtain CNC status, which will be subject to periodic review by the IRS. As long as you can't afford to pay anything, you won't be subject to aggressive IRS action. There's no sense in worrying about a debt you can't afford, and a licensed tax professional understands this better than anyone.