There’s nothing like the weightless feeling you have after paying off a debt. There’s a reason people scream and shout about being debt free. It feels REALLY good.
That’s one reason my team and I here at Memphis Consulting Group, LLC love doing what we do. There’s a satisfaction to seeing our Greater Memphis clients get free from their tax debt shackles.
And we’d like to see things stay this way. Which is one reason we’re focusing on what to do after settling IRS debts today. That way you never end up in the anxiety ridden state of owing the government again.
If you’re dealing with tax debt and need someone on your team who has YOUR interests at heart (unlike the tax resolution farms out there looking to exploit your situation), that’s what we’re here for:
Now, for some practical mindsets and actions you can implement once you’ve squared things away with Uncle Sam.
Let’s start here:
If it was a clear-cut tax debt and you paid it off in one fell swoop, congratulations. If you had a payment plan, let’s make sure you fulfilled the terms.
Payment plan. The name says it all. It’s like getting anything over time, except instead of a washer/dryer at your door you get the IRS off your back. Did you have any problem with the interest and penalties? If so, you haven’t exactly “settled,” and that’s a different story. If you did pay it off, on you go.
Currently not collectible. This is like temporary bankruptcy regarding taxes. The IRS has promised to lay off until your financial times improve. “Lay off” doesn’t mean “forget.” They’ll be back – plan for that.
Offer in compromise (OIC). You got into an OIC for a big tax debt. You made the offer, they accepted (probably for less than you owed), and you surrendered the cash, possibly including tax refunds. You also pledged to stay clean regarding future tax obligations and taxes owed, so here’s a big tip: File tax returns and pay whatever taxes you owe now and forever. You should also know that under the terms of an OIC, the IRS is required (it says) to make certain information – such as taxpayer name, city/state/zip, liability amount, and offer terms – available to the public for a year after the date of offer acceptance. Just know that going forward.
Since going forward is what you’d really like to do now, do you have to keep looking over your shoulder?
You may have heard the IRS just got a huge transfusion of cash via the Inflation Reduction Act – eighty billion bucks, in fact – more than half of which is earmarked for enforcement and collection. The government claims most of the policing efforts will concern the wealthy and crypto, pledging that the little guy is not going to feel a heavier IRS boot on his neck. We’ll see.
Why take the chance? Get an early start budgeting for your taxes; don’t wait until robins are chirping in the April breeze to finally pull your documents together and get them to us. (We’d be happy to do cost projections, by the way, and help get you organized.) Don’t miss estimated tax payments, and try to stay away from cash off the books.
The best way to avoid scrutiny in the future is to not do anything worth looking at…
The dreaded ‘A’ word
One last important question: Did you just fall short on taxes, or was your tax deficiency turned up by an audit?
Your odds of getting audited by the IRS – an agency plagued for years by budgetary cuts and staff losses – are supposedly way down. Supposedly. Why do anything to raise them in your case?
Going forward, report all your income (don’t get a Form 1099 and conveniently forget about it – the IRS sure won’t). Use exact numbers and don’t round up. Don’t claim business or other expense deductions you can’t back up with bulletproof records.
Claiming the Earned Income Tax Credit has also been known to raise a flag. Other popular audit targets now include Schedule C filers (Sole Proprietorships in general) and those who take multiple years’ losses or six figures of income on a Schedule C, those claiming day trading losses or failing to report cryptocurrency transactions, and cash businesses with transactions that were reported by banks and others.
Now, you probably have a question: I got audited once. Does that increase my chance of being audited again?
There are no numbers to answer this, really. Everybody says “no” and thinks “yes.” But if you’re audited for a reason and you continue to apply that reason when you do your taxes, you’re probably providing your own answer.
(By the way, the IRS just announced it’s automatically removing failure-to-file penalties for 2019 and 2020 returns. If you paid the penalty and the account is full paid, the resulting overpayment will be used to offset other liabilities and the balance will be refunded. Seems they do feel bad about being impossible to reach during the pandemic …)
You should also know about the Taxpayer Advocate Service, which is an independent bunch within the IRS that can help protect your rights. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778.
I’d be happy to use my specific tax skill set to help you find some financial and emotional peace, no matter the situation you find yourself in. Let’s get something on the books:
Helping you find tax relief,
Memphis Consulting Group, LLC