April has come and gone. For most Americans who have the privilege to be required to file a tax return, the returns have been filed (or hopefully extended), the paperwork is stowed away in a box, and a long deep breath was taken before forgetting about taxes until next year.
May, When Tax Problems Settle In
You may not be most Americans. For you, April revealed a big tax problem looking you straight in the eyes. Then in May, the problem really began to settle in. That first IRS notice arrived at your door. The balance due glaring at you on the notice just doesn’t feel real. How could it be so high?! Money is tight right now. The kids need braces; your car has bald tires. So you put the notice down somewhere. You promise yourself you’ll deal with it “later” (never defining what later means).
I see this every year. Someone prepares their Federal income tax return and discovers a hidden tax bill that they just can’t pay. Instead of dealing with it immediately, they freeze and push the day of reckoning down the road to some indeterminate date. There is no plan. No action. Just hope somehow that the problem will magically fix itself.
Magic fixes only happen on TV. IRS problems don’t fix themselves and, I promise you, only get worse over time. Penalties add up. Interest continues to accrue daily. A large tax bill just gets larger, and larger.
Here’s What You Need to Know
The best time to deal with a tax problem is right now. Reminds me of the old saying: “The best time to plant a tree is 20 years ago. The next best time is now.” There is great deal of truth in that saying. Now is almost always the best time to act, especially right after filing a tax return with a balance due.
Why? Because right now you still have options:
- You can set up a payment plan before enforcement ramps up.
- You may qualify for penalty relief or hardship relief.
- You may even be a candidate for settlement programs like an Offer in Compromise.
But those options become harder to secure the longer you wait, and you won’t know your options until you deal with the issue.
Dealing with it “later” is always more expensive.
Think of May as the fork in the road: One path leads to a manageable plan and some relief from the worry about your IRS problems. The next path leads to continued (and increasing) stress, an ever increasing tax bill, and fewer good choices.
And if there’s one thing I’ve learned from doing this work: dealing with it “later” is always more expensive.
