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How to regain control over past-due tax debts

On Behalf of | Feb 26, 2023 | Tax Law

When someone owes taxes to the federal government, they are at elevated risk of prosecution and incurring financial penalties. Falling behind on taxes can happen for many different reasons, including a sudden loss of income as a self-employed individual or repeated mistakes on tax returns.

Regardless of how someone falls behind on their taxes, they could face aggressive enforcement efforts from the Internal Revenue Service (IRS). Allegations of tax evasion or fraud could lead to criminal prosecution and also huge tax debts that could cause significant budgetary complications for the taxpayer.

How does someone facing allegations of tax underpayment correct the issue while minimizing the risks involved?

Determine if the claim is valid

A thorough review of someone’s tax records and financial history can help them validate claims from the IRS that they may have underpaid their taxes. An individual who is unfamiliar with the tax code may struggle to review and affirm their personal tax liabilities, which is why many people partner with an attorney during this process.

A lawyer understands the law and also the possible penalties. They also know how to communicate with the IRS once they have validated the claims of a tax underpayment.

Negotiate installment payments

With rare exceptions for those with substantial personal resources that they can quickly convert to liquid capital, most people won’t be able to pay off tax debt immediately. Instead, they will need to arrange for regular payments to the IRS.

Negotiating an installment plan can be complicated, as the individual asking to make payments on a tax debt will have to suggest a specific arrangement. As with the review of someone’s financial records, it is often beneficial to have professional help during this process to increase the chances of the IRS approving someone’s suggestions. After verifying what tax debts may exist and suggesting a repayment plan, individuals will need to ensure that they avoid future tax mistakes and remain current on their payment arrangements with the IRS.

Initiating a proactive response to allegations of tax fraud or tax evasion can help those who are worried about the criminal and/or financial implications of such claims. By setting up payment plans and otherwise addressing overdue tax balances head-on, filers can usually avoid the worst possible consequences that may result from their missteps.