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Understanding IRS Financials & Your Options

October 21, 2010

The IRS has a distinct Financial Analysis System. They use this system to determine your entire financial situation, when you can pay them, and how you should pay them.

Knowing and following the IRS’s rules is an essential first-step to repaying your tax debt as smoothly as possible. Understanding how the IRS evaluates your financial situation will help you greatly reduce your chances of making costly mistakes.

Determining the True Amount of Tax Debt Owed

The first step for resolving your tax issue is determining the exact amount you owe the IRS. This gives you an idea of how you can expect the IRS to act toward the debt and lets you know which options are available for resolving the tax issue.

Your must contact the IRS to get the exact amount you owe. You may have received statements in the mail describing an amount owed, but these are not likely to be up-to-date, as interest and penalties continue to accrue. Calling the IRS to get the Exact Amount Owed… After you call the IRS, ask for the following:

  1. The total and up-to-date amount that you owe the IRS
  2. Ask which tax years correspond with the debt owed. For example, “$20,000 in Tax Debt owed for the years 2007 to 2008”
  3. Ask if you’re missing any Tax Returns and get the years for the Tax Returns missing. These must be filed to resolve your Tax Debt. This is known as being Compliant with the IRS.
  4. Ask when the Statute of Limitations runs out on your Tax Debt. The Statute of Limitations is the amount of time the IRS has left to collect on the amount you owe. The IRS Statute of Limitations is for 10 Years, but certain factors can extend it.
  5. Find out the address for where you would submit a Tax Resolution Request or other necessary IRS Forms.

Different Debt Levels

Different Debt amounts receive different levels of treatment. Tax Debt of more than $100,000 is handled by a high debt level unit. It’s important to take care of a tax debt as soon as possible so it doesn’t grow into a high level debt if it isn’t one already.

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