5 Steps to Resolve Your Tax Debt

Have you accrued tax debt with the IRS and now it’s time to address the situation, but you’re not entirely sure where you even begin? We know the process can be overwhelming, if not paralyzing, plus…it’s confusing as heck! Take a deep breath - we’ve got you covered. We are going to walk you through the basic steps of resolving your tax debt. By the time you're done reading this blog post, you'll feel a sense of relief knowing what the next steps are. Let’s get started: 

1) Compliance Check—You will finally get the answer to the dreaded question, how much do I owe? Completing a compliance check will give you a thorough overview of your account with the IRS, including (but not limited to) total balance due, liability breakdown, list of any missing returns, substitute returns filed on your behalf, CSEDs, and if any liens have been filed. 

2) File Any Missing Returns — The IRS requires you to be filing compliant in order to enter into a resolution and maintain that resolution, with the exception of Currently Not Collectible status. Therefore, you will need to file any past due returns and start making your current tax payments (such as ETPs or FTDs).  If substitute returns were filed on your behalf, you will need to decide if it would benefit you to file or not.

3) Draft Your Financial Statement — Most (not all) resolution options require you to submit financial documents. The documents needed will vary somewhat depending on your situation, but typically you will want to gather information on any assets (investments, retirement, whole life insurance policies, properties, boats, rv’s, etc.), income, and monthly expenses. After you assemble those documents, you can begin preparing the required IRS financial form. You can find the list of forms here.  

4) Prepare Your Resolution Proposal — Decide which resolution option is best for you; prepare your resolution submission, including the financial documents you prepared in Step 3, and submit your resolution proposal. Then you wait! The IRS should respond with an approval or denial letter in the mail after a few weeks. 

5) Remain Current and Compliant — This means maintaining the terms of your resolution agreement so that it does not default. Some stipulations vary depending on the resolution. However, at the bare minimum, you need to stay current with payments and filings. Not doing so WILL default whatever resolution you agreed to with the IRS.

So there you have it! Those are the 5 basic steps to resolving your tax debt. We hope that this helps provide a bit of clarity to the process, and helps you narrow down what steps you might want to tackle on your own, and what steps you might want us to support you in. Still have questions? Drop them in the comments below or book a free consultation with one of our licensed Enrolled Agents.