Receiving an IRS notice can fill you with fear and anxiety. Once in this headspace, it can be hard to think rationally, which often leads to major mistakes. These mistakes often make the situation much worse. In reality, all you need to do is remain calm and do things by the book. Being aware of the most common mistakes people make after receiving an IRS notice can help you to avoid making them yourself. Let’s take a look at these mistakes so that you can be sure that you handle your tax debt correctly.
Ignoring the Notice
This might be the most common mistake people make. You read the notice, it fills you with dread, and so you tuck it in a drawer somewhere to be forgotten. Out of sight, out of mind, right? Wrong. Notices typically include response deadlines. Should you miss this deadline, you’re opening yourself up to additional penalties, interest, or collection actions. Ignoring the notice will do nothing but make your situation worse. Instead, you should read the notice carefully, making sure that you understand exactly what you owe and why. Note any important dates or required actions that are mentioned and do your best to comply with them.
Assuming the IRS Is Wrong (or Right)
Many people will look at the notice and assume it is wrong. This is especially true of people who believe that they pay their taxes correctly every year. They assume the notice is wrong and that it is nothing to worry about. They believe that it is a mistake and thus requires no action on their part. This is a big mistake. It is quite easy to make a mistake when filing your taxes, which could result in you owing more without you knowing.
On the other hand, some people assume the IRS is always right. They see it as an infallible organization that doesn’t make mistakes. In fact, 49% of Americans worry that they filed taxes incorrectly, making them very likely to believe they owe the IRS money. The truth is that the IRS can make mistakes just like anyone. It is entirely possible that they are wrong.
Regardless of whether you think the IRS is right or wrong, it always pays to compare the notice with your tax return and supporting documents. Before taking any action, make sure the information enclosed in the notice is correct.
Panicking
Many people panic as soon as they see an envelope that is from the IRS. They spiral and start thinking that everything they have saved is going to be taken from them. Don’t be one of these people. Instead, take a breath and actually read the notice. Many notices have nothing to do with enforcement action. According to the Internal Revenue Service, they can also simply be requests for information or notifications of account changes. Even if it is an enforcement action, don’t panic. You have options.
Missing the Response Deadline
As mentioned, IRS notices typically include response deadlines. These deadlines are a strict date by which you must reply to the IRS to dispute a change, pay a balance, or submit requested documents. These deadlines are typically 30, 60, or 90 days from the date printed on the notice. Missing a deadline can trigger additional interest, add penalties, or cause you to forfeit your legal appeal rights. Make note of any deadlines and be sure to contact the IRS before they are reached. Even if the deadline is for paying a balance that you can not afford, it is still vital that you contact the IRS before the deadline. This will allow you to discuss other options with them.
Paying Without Understanding Your Options
Many people see that they owe a balance, panic, and then pay it all at once. While this does clear the tax debt, it can create a serious financial burden. Most people do not have enough money on hand to pay off their tax debt and still cover all of their other living expenses, such as rent, car payments, and basic necessities. Instead you should explore other options. This is best done by engaging professional tax relief services. These experts will be able to explain all of the options available to you, such as payment plans, and negotiate with the IRS on your behalf. This allows you to handle your tax debt without sacrificing your financial security.
