When Tax Debt Comes as a Surprise

Last updated on October 31, 2022

Taxpayers are often unaware that they have tax debt until the IRS sends them notification. Many times, taxpayers find themselves in tax debt due to unintentional errors such as inaccurate income figures or improper deduction claims. When the IRS discovers such errors, they send a notice informing taxpayers about the amount of tax debt and how to pay it. Although, the IRS prefers taxpayers to pay the entire tax debt in full in a single payment, they can explore the various IRS payment programs if they are unable to pay the debt in full.

Tax Debt Due to Errors

When taxpayers get into tax debt due to error, it is not always their fault. Sometimes, the error is caused by the IRS. If taxpayers receive a notice for the tax debt and after a review, they find that there is no mistake, they must immediately inform the IRS about the mistake. However, if an error was made by the taxpayer, they must resolve it quickly by either paying the full tax debt amount in a lump sum or arranging a tax debt payment plan with the IRS.

The IRS has various payment plans such as Installment Agreement and Partial Payment Installment Agreement that allow taxpayers to pay their tax debt comfortably over time. It is advisable to pay the tax debt quickly because delay will result in an accumulation of penalties and interest that the IRS charges on tax debt that remains to be paid.

IRS Notices & Collection Action

The first action that the IRS takes in cases of tax debt is to send a notice that acts as a reminder to resolve the tax debt. If taxpayers ignore IRS notices and do not make any effort to resolve the debt, the IRS moves to aggressive collection actions such as federal tax lien and tax levy.

It is advisable to begin exploring payment options or pay the tax debt in full after the initial notices. Apart from the adding up of IRS penalties and interest on the tax debt amount, taxpayers also get the benefit of avoiding lien and levy that damages financial stability.

Seeking Help for Resolution

If the amount of tax debt is large and cannot be paid in full or partially, taxpayers can hire outside help to achieve the most beneficial resolution. Tax resolution companies house tax lawyers and experts that assist taxpayers in resolving their tax problems, including tax debt. Our ratings and reviews of some of the top tax resolution companies will help them make an informed decision.