This is the second installment of the short "Intro to Tax Relief" series, presented by Tax Defense Network. You can learn more about them by reading their full review.
Trouble with the IRS is a touchy subject for most people, even those who've never had to deal with them directly. A lot of folks float through life, blissfully unaware of what it's like to even receive a letter about a tax problem. Why, then, does it seem like no one wants to talk about the possibility of facing a problem with the IRS? Could it be that all the rumors are true, and dealing with an audit or a tax debt is every bit as stressful as people assume?
You may occasionally wonder about your own taxes; whether or not you paid the correct amount, if you accidentally left off income you should have reported. What if it was a couple of years ago and you don't even remember what you claimed and what you deducted? An audit for that return wouldn't exactly be convenient. You'd like to think that you'd have some idea if there was a chance you were in trouble, but isn't that the nature of trouble....to show up when you least expect it? Maybe you're at a transitional point, considering purchasing a house or getting married - or both. You'd probably like to know beforehand whether or not an old tax skeleton is likely to pop out of the closet (and so would your spouse-to-be!).
Naturally, you'd like to make sure you're in the clear without calling yourself to the attention of the Internal Revenue Service. After all, there's probably nothing to worry about, but there's no sense in ringing the bell if there is. There are a couple of indicators to be on the lookout for, which will either put your mind at rest or confirm your suspicions:
A simple check of your tax records may put you at ease. Generally, the IRS advises keeping tax information for at least three years. Go back through your documents and see if anything looks out of place. If you're like most people, you've kept work pay records (if not, your employer can provide these to you upon request). Double-check your math and confirm that you didn't have any out of the ordinary income; you'll probably remember if you earned anything unusually higher than normal in the last couple of years.
A very roundabout way of finding out if something's amiss is to check your credit. If you have an unpaid balance with the federal government, particularly if it's been around for a while, you may have a federal tax lien against you. A lien is basically a claim that the IRS puts on any money, property, or assets you own. It's their insurance policy in case they can't get you to pay, and lets other creditors know you're a person of interest. Tax liens are a matter of public record and they're regularly sought out by credit reporting agencies, which is how they end up on credit reports. If you have a lien, you can expect not only an impact on your credit score, but you may also find it difficult to take out a loan or open a new line of credit.
If the IRS wants to reach you, they'll use the post office to do it. Typically, the government won't contact you by phone. However, if you've moved recently and for some reason didn't include your current address on your last return(s), the IRS may have no way to alert you to a problem. If this is the case, you could very well have a debt that's steadily growing from penalties and interest. Any letters that come in from the IRS should be opened and read immediately. It might not be anything serious, but you won't know until you look it over.
There's no shame in being cautious, particularly when it comes to your taxes. If you have a more pressing concern, such as unfiled years, you may want to call the IRS directly. Not knowing whether or not you owe money because of unpaid taxes is the worst; not just for your state of mind, but because the original debt can quickly balloon from the additional penalties and interest.
Depending on what you find from digging, you may need to think about getting some professional advice. A licensed tax professional is ideal for issues concerning back tax debts - particularly over $10,000 - unfiled years or some other, undesirable IRS collection efforts. Hopefully, your spot check won't turn up anything more interesting than a stack of lost receipts. In a worst case scenario, though, looking for help is just good, preventative maintenance.
*Written by Christopher Wiggins, Content Writer for TDN.