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Are you going to owe taxes this year?

It’s a very scary experience when you have your tax returns finished, and you find out that you’re not going to receive a refund. Worse however, is the lump in your throat as you realize that in addition to not getting a refund, the government is actually expecting you to cut them a check.

If you prepare your tax returns now, you may have a little bit of time to prepare for this new debt. However, chances are that even with time, the surprise tax debt you owe to the Internal Revenue Service (IRS) is not one that will be paid shortly. So what now?

First the risks: The IRS the most powerful collection agency you can owe a debt to. Their collection enforcement powers include the right to levy your income and bank accounts, exercise liens, seize your assets, and in some cases be an unwanted guest at your home or business. And then, there are criminal penalties that may apply to tax debts that are not otherwise available to other debts as there is no longer a debtor’s prison.

Once the sticker shock of your tax debt doom phases out, it’s then time to prepare to fight with the IRS. The first step in the process is to question whether you really owe the debt. Questions you need to answer are: Did you make a mistake? Are there errors in your financial information? Does your tax preparer know what they are doing? Is there a valid legal position you can rely on in adjusting your supposed tax debt?

If you are not able to discover an error or basis for adjusting the debt, then the next stage in tax debt grief is usually to ignore the debt; don’t do this – it will make your situation worse. If you owe a tax debt that you are unable to pay, then you have a tax debt collection case and there are tax debt collection options.

Depending on how much money you owe, you may just need some time to come up with the money. The IRS does grant collection holds for promises to full pay a tax debt, depending on how much time is needed and how much money is owed.

This is about the time of year that the IRS begins to remind the public that they allow payment plans if you owe a tax debt. Take advantage of this option if you can afford to make monthly payments. However, caution and knowledge of the tax rules are needed because there are different types of payment plans available and the IRS is a debt collector at this stage; not your friend. So, be sure not to agree to a payment plan that you realistically cannot afford to pay. If you are unable to make payments to the IRS, or if your payments will not make a dent in the debt owed, then petitioning the IRS for financial hardship relief or negotiating a debt reduction may be the answer to your tax debt problem.

This article is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.