Beating Tax Debt: Part 1- Diagnosis

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One of the more interesting things that I’ve encountered when I worked at Internal Revenue Service is the confusion surrounding tax debt. For many people that owe taxes, they find it difficult to get out of tax debt and stay out of it. They don’t quite understand how they got into the debt and what they can do to prevent it in the future. No matter how big or small the bill, the steps for resolving the issue remains the same.

In order to STOP owing IRS, you must understand WHY you owe and you must STOP doing whatever is causing you to owe.

Of course, many people are so intimidated by IRS that they won’t even call IRS to get some help with their tax dilemma. Even worse, many paid tax preparers are not very good at understanding and explaining what generates a tax bill. Sorry to say it, but many paid tax preparers only input numbers, without having much knowledge of tax law and its implications. I’m here to tell you: if you aren’t clear on why you owe, you WILL owe again. So, Step 1 of eliminating tax debt is to properly diagnose what caused the tax bill.

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The easiest way to figure out what happened with your taxes is to order your return and account transcripts online (these are FREE of charge and available immediately after signing up on IRS’s website; unfortunately, at the time of this post, the online order system is unavailable, though the transcripts can be mailed to you). Then you can compare the numbers on your copy of the tax return to what’s on the transcript. If you don’t have enough prepayments (either tax withholding, quarterly estimated tax payments, or tax credits) to cover your tax, then you will have a bill. If you find yourself owing for one year, after never owing in previous years, you may want to check the transcripts against one another, to see where the difference occurs.

If you look at your transcripts and are still confused, you can visit your local walk-in IRS so that one of the employees can walk you through your transcripts. If that is more time consuming than you would like, feel free to contact me, and I can assist you. After working at IRS for nearly a decade, I’m confident that I can resolve your issue.

However, I’m sure that with a little patience, anyone can figure out what happened with their taxes to cause a tax bill. This is a crucial step in knocking out tax debt. Stay tuned for Part 2 of the “Beating Tax Debt” series, so you can find out the next step needed to handle your tax debt permanently!

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