The IRS has many different payment options for taxpayers who owe money. The important thing is to reach out and arrange a payment plan. As long as you address it, tax debt is almost always manageable. If you ignore it, though, tax debt can grow out of control. Here’s what you should know.
For help managing tax debt and other financial matters, consider matching with a vetted financial advisor for free.
The IRS Will Never Call You
First and foremost, understand that the IRS does not call. Not ever. The agency only sends letters to notify you of a problem or a debt.
If you have received a telephone call claiming to be from the IRS, or making any other claim regarding a tax debt, it is a scam.
What Is Tax Debt?
Tax debt occurs when you don’t pay your taxes in full by your filing deadline, typically April 15. For most workers, this isn’t a concern. If you have a W-2 job, your employer will automatically withhold your income and payroll taxes. As long as they calculate this withholding correctly (not always a guarantee), your taxes will already be paid by April 15.
But if you’re self-employed, own a small business or just have an employer that screws up your withholding, then you’ll owe money come tax time. If you don’t pay that bill in full, you’ll owe tax debt.
There are three main reasons that people get into tax debt:
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Miscalculation – You paid the full amount listed on your taxes, but made a mistake calculating the amount owed
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Underpayment –…
