As we approach Halloween, I find myself watching more and more scary movies. As creepy as vampires, werewolves, and zombies are; nothing quite compares to the fear of finding an IRS letter in the mailbox telling us we owe them money. Dealing with back taxes and the IRS can be scary at first, but if you follow the right steps you can find your way out of the dark.
Perhaps the best way to learn would be to take a cue from the characters in scary movies! You may be surprised the more treats than tricks you can find when dealing with back taxes.
What you don't know can hurt you.
In one scary movie, someone walks into a dark basement where a monster is lurking in the shadows – even after we were yelling at the TV for them to not go down there. Your back taxes are no different! The longer they sit unnoticed or ignored by you, the bigger the problem will grow. Facing the problem head-on and being ready with a plan of attack is the best way to defeat the monster.
What can you do?
Know what years you still have to file, what you owe, and how long you have until the next deadline. The first step most tax resolution firms take is to find out exactly what you owe, and what years still need returns filed. This is especially important if the IRS filed a tax return for you. Knowing what your total back taxes are will help with understanding the best course of action. You can even contact the IRS yourself and get the years in which you are missing tax returns, and the balances.
If you ignore the problem, it can grow out of control.
Think of your typical zombie movie – it doesn’t take long for one little bite to spread over the entire population. The number grows bigger and bigger, and it just gets harder for the good guys to fight them off! Left unchecked, your tax bill can grow exponentially with each passing month and quickly overwhelm you. By addressing any letters you receive from the IRS as soon as possible, you can prevent these problems from growing out of control. The last thing you want is to receive a Final Notice of Intent to Levy, which means the IRS is preparing to seize your assets (settlements or wages)!
What can you do?
In most cases, swift action is the best course to take. Whether it's contacting a tax professional such as ATBS, or simply responding to the letter by calling the listed 1-800 number – it’s important to take action as soon as possible. Letting these letters go unaddressed could result in the IRS garnishing your wages or property. By taking action now, you’re letting the IRS know that the issue will be resolved and prevent them from future threats.
Use the proper ammunition.
You’ve seen the movies, so you know that there are some sure-fire ways to stop monsters in their tracks – such as wooden stakes for vampires, or silver bullets for werewolves. Although solving tax issues isn’t as simple, there are steps you can take to get there.
After contacting your tax resolution firm or ATBS, you will need to file your missing tax returns. You may even be able to reduce the balance owed to the IRS. If you neglect to file your taxes, the IRS will do a Substitute for Return for you – which is the worst filing status. They will not take into account any expenses or deductions, which can mean thousands of dollars you should not have to pay taxes on. Certain business deductions can help reduce your liability, especially if you know what deductions to look for in your industry.
If you are missing documents, you can order a Wage and Income Transcript to help file the appropriate income. Make sure that you have proper documentation of any receipts or expenses you claim, so that if your return faces any additional scrutiny by the IRS you will be prepared for any potential audit.
Depending on your situation, you may qualify for several different resolution options. Talk to your ATBS tax professional to see what your options are.
Once you’ve resolved your back tax issues, it’s important to stay on top of your taxes in the future. Have a plan of attack, and don’t let the monster return. If you’re an independent contractor, this means paying appropriate quarterly tax estimates, and filing your taxes timely every year.
Always be sure to find a trusted firm that has helped thousands of people in circumstances like yours. You will want to understand the company’s process, and be sure that it truly helps you fix the problem. A tax resolution firm should know the ins and outs of what the IRS expects, as well as understand the industry in which you work. Never be afraid to ask questions.
When you’re watching scary movies this Halloween, think about what everyone is doing wrong. Think about what you would do differently, and apply it to your taxes! You can prevent being overwhelmed by back taxes by being prepared, and being proactive now. Be ready to face the monsters head-on, to prepare you for the future of your business!