The 3 Worst Things You Can Do if You Owe the IRS
Allan Rolnick
Tax Accountant | Tax Advisory, Tax Planning, Tax Resolution
October 23, 2024
Owing money to the IRS is stressful, and it’s easy to panic or make the wrong moves. Unfortunately, some actions (or inactions) can make the situation much worse, resulting in penalties, interest, and aggressive collection efforts. If you owe the IRS, it’s critical to avoid certain pitfalls that can turn a manageable debt into a financial nightmare. Let’s go over the three worst things you can do when you owe the IRS—and what you should do instead.
1. Ignoring the Problem
The worst thing you can do if you owe the IRS is to ignore the problem altogether. People often think that if they avoid dealing with it, the issue will somehow disappear. The truth is, the IRS doesn’t forget, and the longer you wait to address your tax debt, the worse it gets. Interest and penalties continue to accrue, and eventually, the IRS will start taking more serious action like wage garnishments, bank levies, or property liens.
What to Do Instead: If you owe taxes and can’t pay right away, reach out to the IRS or a tax professional as soon as possible. The IRS has programs in place, such as installment agreements, Offer in Compromise, or currently not collectable, that can help you manage your debt. The key is to take action before the IRS ramps up collection efforts.
2. Taking Out High-Interest Loans or Maxing Out Credit Cards
Another mistake people make when trying to pay off IRS debt is turning to high-interest loans or credit cards. They often do this because they feel pressured to pay the IRS immediately, but these types of loans can create more financial problems than they solve. The interest rates on credit cards and payday loans are much higher than the interest the IRS charges. In the long run, you could find yourself drowning in even more debt—without making a significant dent in your tax balance.
What to Do Instead: Don’t rush to borrow from credit cards or take out a risky loan. Instead, explore options directly with the IRS, such as a payment plan, where you’ll typically pay much lower interest rates. There are also options to defer payments if you’re in a temporary financial hardship.
3. Trying to Hide Your Assets or Income
Some people believe they can outsmart the IRS by hiding income, moving assets around, or not filing returns. This is a major mistake. The IRS has extensive tools to uncover hidden assets, including bank account information, property records, and financial transactions. Failing to report income or hiding assets not only increases your debt but can also lead to criminal charges for tax evasion, which comes with severe penalties, including fines and possible jail time.
What to Do Instead: Full transparency is always the best policy when dealing with the IRS. If you’re concerned about your ability to pay, be upfront about your financial situation. The IRS may be willing to work with you through programs like an Offer in Compromise, which allows you to settle your tax debt for less than the full amount owed, or a Currently Not Collectible status, which temporarily halts collection actions if you truly cannot afford to pay.
How a Tax Resolution Company Can Help
Dealing with the IRS is complicated and stressful, but you don’t have to face it alone. A tax resolution company like [Your Company] can be your strongest ally in resolving tax issues. Here’s how we can help:
Assessing Your Situation: We’ll conduct a detailed review of your tax debt, financial situation, and any notices you’ve received from the IRS to determine the best course of action.
Negotiating with the IRS: Our team of Certified Tax Resolution Specialists knows how to negotiate directly with the IRS to secure a payment plan that works for you, or in some cases, reduce your debt through an Offer in Compromise.
Stopping Collections: If the IRS is threatening to garnish your wages, place a lien on your property, or levy your bank account, we can help stop these actions while we work to resolve your case.
Preventing Future Issues: We’ll help you get back on track with future filings, ensuring that you stay compliant and avoid tax problems down the road.
At Allan J Rolnick, from TriState Tax Resolution, The Tax Rescue Squad, we’ve seen every type of tax situation and know exactly how to get results. If you or someone you know owes the IRS, don’t wait until the situation gets worse. Contact us at 718-841-7317 for a free 15-minute consultation, and let us help you regain control of your financial future.
Who’s Allan Rolnick:
With 40 years of experience, I have mastered the art of navigating complex IRS challenges, resolving even the toughest tax issues.
I’ve helped countless clients find fair and favorable solutions with the IRS and I can help you too.
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