Knowing if you owe the IRS is the first step toward a stress-free tax season.
Last March, US News & World Report polled 1,200 Americans who owed money to Uncle Sam. More than a fifth reported being “extremely stressed” – and nearly 3 in 10 said “they won’t be able to pay by the April 18th deadline.”
Tax debt can snowball into bigger problems.
“A few respondents gave additional insight: They can’t pay their bills, they can’t afford their medications and they have to cut spending on groceries, clothing and essentials,” the survey says.
You can avoid a lot of pain and frustration by simply learning and planning. Let’s get into it…
Determining IF and WHAT you owe the IRS
Filing a tax return will inform you if you need to pay anything. Not filing, however, leaves you in the dark about your tax status, which can bring financial and legal struggles down the road.
Look out for these signs from the IRS:
- Collection notice
- Garnished wages
- Property lien
If you don’t want to wait around for extreme measures to be taken (which you shouldn’t), contact the IRS directly by calling 1-800-829-1040. You can also connect online: Create a profile in the IRS tax account portal or visit IRS.gov.
To make the most of your time accessing the IRS portal, have your personal information ready:
- Social Security number and date of birth
- Current filing status (single, married filing jointly, married filing separately, head of household, qualifying widow(er) with dependent child)
- Mailing address of your last return
You may have to provide additional details like:
- Email address
- Cell phone with your name on the account
- Account number for a mortgage, credit card or other active loan in your name
Keep in mind that any official notices should arrive by mail (or online if you set up an account through the IRS website). Text messages, phone calls, and unfamiliar emails are probably scams, so don’t reply.
Reach out, seek advice, and make a plan to pay
Knowing where you stand with the IRS might feel intimidating at first, but it’s better to be aware of your situation so you can prevent further costs.
The tax portal will display your payoff amount (as of that date) along with your payment history (if any) and the previous year’s tax filing.
If you have trouble accessing your records through the portal, you can call 1-800-829-1040. The IRS usually accepts phone calls from 7 am to 7 pm Monday through Friday local time. Hours are subject to change, so it’s best to check the website before you call.
After you track down your current amount due, you can take the next steps to pay it off.
Where to go once you owe
Back taxes – or taxes that have remained unpaid after the year they are due – accrue interest and penalties, and it can add up quickly. The IRS can apply penalties. Unfortunately, penalties and interest pile up regardless of your ability to pay.
Once you know how much you owe the IRS, take immediate action. If you can, pay back what you’re legally required to, and fast. If you don’t, you could face major consequences like wage garnishment, liens and bank account levies.
Consider contacting a licensed tax attorney to review your options for tax debt relief. You can apply for a repayment plan or request to stop collections if you can’t afford to make payments at all.
There is a limit on how long the IRS can collect tax from you, and that is generally 10 years from the date your tax was assessed. The Collection Statute Expiration Date does not mean you should wait around until the government can’t do anything about your tax debt. The IRS will actively go after what’s owed within that period – this includes garnishing your wages and seizing your assets.
It’s always best to consult with a tax professional and get in touch with the IRS about your balance instead of letting the situation get out of hand.
Article last modified on November 13, 2023. Published by Debt.com, LLC