The IRS Says I Owe… Now What?
My client sat across from me, looking a bit anxious. “I just found out I owe back taxes, and I have no idea how to handle it.”
For anyone who’s received that notice, it’s a situation that can feel overwhelming. The IRS isn’t exactly known for sending warm-and-fuzzy reminders. I reassured her: “You’re not alone in this. Let’s walk through a few steps you can take to get back on track.”
Step 1: Understanding Your Tax Debt
The first thing we did was look up her IRS online account to see exactly what she owed. “It’s like finding out where you stand so you can plan your way forward,” I explained. Knowing your debt amount is the first critical step in figuring out the right approach.
Step 2: Choosing the Right Payment Option
I could see she was worried about paying the whole amount at once, so we went over her options:
· Pay in Full: “If you can manage it, paying in full is the simplest way to avoid interest piling up,” I said. But she wasn’t sure if that was realistic for her, so we kept going.
· Installment Agreement: We discussed breaking the debt down into monthly payments. She could do a short-term plan for a smaller balance or a long-term plan for a bigger debt. This option would let her chip away at it without overwhelming her finances.
· Offer in Compromise (OIC): This was a possibility if paying in full wasn’t an option. The IRS sometimes lets people settle for less than they owe, especially if paying the full amount would create a significant financial burden. She liked this idea but understood that it involved an application and a review of her finances.
· Currently Not Collectible (CNC) Status: If things became really tight, she could request this status, which would temporarily stop the IRS from collecting while she focused on her immediate needs. “But keep in mind, it doesn’t erase the debt,” I reminded her, “it just buys some time.”
· Penalty Abatement: She’d experienced some unexpected financial challenges that had made it hard to pay her taxes. I told her that with a reasonable explanation, she might qualify to have some penalties removed. It wouldn’t get rid of the tax debt, but it would reduce what she owed in penalties.
Step 3: Reach Out and Stay Informed
We made a plan to consult with a tax professional to help her weigh the options. “Keeping in contact with the IRS is important,” I advised. “They have people who can answer questions and guide you through.”
As she left, I could see a new sense of relief. “It’s not a lost cause,” she said, smiling. By taking proactive steps and finding the right support, she had a clear path forward—and a weight lifted off her shoulders.
If you're planning to buy a home, start by addressing any outstanding tax debts to ensure a smooth purchasing process. Once you're ready, contact Tasha Smith with the Southern Home Team at 904-993-1628 or dreamsouthernhomes@gmail.com. Serving FL, GA, and SC, we're here to guide you every step of the way on your journey to homeownership!