Are you in tax trouble? There are still a few hours left in National Get Out Of the Doghouse Day. Why not take advantage of the opportunity to clean up your finances and tidy up your tax bill? It will get out of the doghouse with Uncle Sam and probably, your spouse/significant other/business person/other person nagging you about it.
If you’re not sure where to start, consider these nine quick tips:
1. Open your mail. This remains at the top of the list of what I consider to be my best tax advice ever. As I’ve said before, while I understand that facing a stack of mail from the Internal Revenue Service (IRS) or your state or local tax authority can be daunting, letting that mail sit is the single worst thing you can do when it comes to tax matters. Open your mail. It’s rarely as bad as you think – and opening the mail can’t make it worse.
2. File. At least nine out ten taxpayers who walk through my door and have not timely filed their returns have one thing in common: they believe that they won’t be able to pay what they owe. That may be true. But it shouldn’t be a reason not to file. While it’s true that you should file on time, filing late is better than not filing at all. Similarly, filing without paying is better than not filing at all. Here’s why: there are penalties for failure to file and failure to pay so filing as soon as possible will stop some of the bleeding. Penalties are based on the amount that you owe and the length of time that passes from the due date. That means that the sooner that you file, the better – even if you can’t pay. Filing also helps you assess the damage (it may be less terrible than you think) and gets the statute of limitations rolling.
4. Keep an eye out for tax amnesty programs.These programs may help reduce your overall tax due, shorten the statute of limitations or mitigate penalties and interest. Alabama has an amnesty program in progress and Arizona’s amnesty program kicks off beginning September 1, 2016. Some other states, including Georgia and Kansas, have proposed upcoming tax amnesty programs so be on the lookout. Note that relief isn’t restricted to states: IRS has an offshore voluntary disclosure program which allows you to come clean for overseas income and accounts. Amnesty programs like these can help you dig out of trouble and make a fresh start (typically, you have to promise to remain compliant). If an opportunity exists for you to participate in an amnesty program, check out the details, and see how it might benefit you.
5. Figure out what you’re doing wrong – and make a change. I know this sounds obvious, but you’d be surprised at how many taxpayers repeat the same mistakes over and over. It may be the case that making a few small changes results in a more favorable result going forward. For example, double-check your withholding and make sure that you’re claiming the correct number of exemptions; review your filing status and make sure that it’s best for your circumstances; don’t overlook deductions or try to claim the wrong deductions; be sure that you’re on track to withdraw the correct amounts from your retirement plans; make sure that you’ve reported all of your income (including foreign income) and do a quick calculation to make sure that your estimated payments make sense. Don’t keep making the same mistakes over and over – they’ll just land you in the same place each time.
6. Contact your tax authorities. You can’t resolve your tax obligations by ignoring them. Help is available. To contact the IRS about your tax account, start with your notice or letter. Generally, there is an address on the top left-hand corner and a contact name and phone number in the top right-hand corner. That’s the best contact to use because the folks at that number will understand what’s going on with your account. But if you’ve lost the notice or you have another issue related to your individual tax account, try calling the IRS at 1.800.829.1040, Monday – Friday, 7:00 a.m. – 7:00 p.m. your local time (Alaska & Hawaii follow Pacific Time). If you’re calling about your business tax account, call 1.800.829.4933, Monday – Friday, 7:00 a.m. – 7:00 p.m. your local time (Alaska & Hawaii follow Pacific Time). If you’re calling and you have a hearing impairment, call toll free, 1.800.829.4059 (TDD), Monday – Friday, 7:00 a.m. – 7:00 p.m. your local time (Alaska & Hawaii follow Pacific Time). If you live outside the United States, call 267.941.1000, Monday through Friday, from 6:00 a.m. to 11:00 p.m. (Eastern Time).
7. Reach out to the Taxpayer Advocate Service (TAS). If you haven’t been able to resolve your tax issues directly with the IRS, consider the TAS. The TAS is an independent organization within the IRS which works to help taxpayers resolve issues that taxpayers haven’t been able to fix on their own. For more information about TAS, check out this prior article.
8. Remember that this is your problem. It’s tempting when you find yourself in a bad situation to lash out. When it doesn’t feel fair that you have to pay, you may want to draw in others: your terrible boss, your lousy ex, your good-for-nothing brother-in-law or the business partner who screwed you. Don’t. Wasting your energy – and perhaps your money – to get someone else in trouble and exact your revenge isn’t going to help you and often, it can make a bad situation worse by taking away the focus from your own issues. Leave the other messes for someone else to clean up.
9. Find a great tax adviser. I can’t emphasize enough that the importance of seeking out a responsive, competent tax adviser. Even if you do your own taxes, you may need someone to help you out if you run into trouble. Don’t rely on someone who will disappear after April 15: the IRS doesn’t typically seek you out during tax season but may have questions once processing heats up (in the tax world, we call the post-filing season “correspondence season” since that’s when those IRS letters go out). You want someone who understands both the tax issues and your personal situation and can communicate well with the taxing authorities to resolve your tax matters. Do your research, ask for referrals and have a list of questions to ask your potential tax adviser: remember, it should be a good fit for you both.
Nobody wants to be in the doghouse, especially when it comes to taxes. Why not take steps to get out of the doghouse and off to a fresh tax start today?