Don’t Let A Prior Tax Problem Catch Up With You

Posted on 01. Sep, 2011 by in IRS

Somewhere in your recent or somewhat distant past, you may have made a misstep and a prior tax problem is now on your plate.

It happens and you should deal with it. Ignoring a prior tax problem can prove very costly in terms of stress and money.

How is the best way to handle such a situation?

The soundest advice is to first turn to the Internal Revenue Service to be sure you know exactly what the problem is and what the agency wants you to do to correct the problem.

If you a lucky, the resolution of your prior tax problem can be simple. Perhaps you failed to file one or more forms, didn’t sign a form, or forgot to attach certain documentation.

On the other hand, your prior tax problem may be related to failure-to-pay issues. These can prove to be costly to resolve but resolved they must be.

The longer you wait to correct the prior tax problem, the more money you will have to pay to get it resolved. The reason for this has to do with penalties and interest related to the delinquent tax payments.

For example, there are penalties for failure-to-pay as well as failure-to-file.

The penalty for filing late is generally 5 percent of the unpaid taxes for each month or part of a month that a return is late. While this is capped at 25% of the unpaid taxes, it can prove to be a considerable amount.

Even if you do not have all the money you need to pay in taxes, you should still file a federal income tax return and see if you can take advantage of an interesting service offered by IRS.

If you already have filed your return, owe taxes and have not yet received a bill from IRS, there is the possibility of an Online Payment Agreement (OPI). This can be used to establish an Installment Agreement on current year returns. This can be a really good deal to avoid a future tax problem.

As always, a situation with a prior tax problem may require the services of a tax professional, either a certified public accountant (CPA) or a tax attorney.

While this will cost some money, in the long run it may prove to be the least expensive way of resolving that pesky prior tax problem.

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