Why You Shouldn’t Wait to Have a Good Year to Fix Your Taxes


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If you’re struggling with a tax problem, it’s natural to want to wait until you’re in the best possible place to solve this problem. The longer you wait, however, the problem only intensifies and the greater sum you’ll owe. Here’s why you should not wait to have a good year to fix your taxes, whether you owe back taxes or have unfiled returns.

Why do people avoid solving tax problems?

There are a lot of main reasons why people avoid resolving tax problems. Over the past 15 years, the IRS has become less proactive about enforcing payments and filing. This means you might not hear from the IRS about a tax issue until further down the line, thus allowing people to put it off longer. The reality is even if you haven’t already heard from the IRS about your tax problem, they are aware of the issue and will eventually take action.

In addition, many avoid resolving tax issues because of an inherent fear of the IRS. Dealing with a large, often mysterious, government entity like the Internal Revenue Service can be intimidating. People feel they don’t have any options when fixing taxes with the IRS, and this can lead them to postpone payments and filing. Luckily, you do have options when it comes to dealing with your tax problem, and you don’t have to face the IRS alone.

Now is the best time to solve your tax problems.

While it’s tempting to avoid your tax problem until you’re confronted by the IRS, now is actually the best time to take action. Recently, the IRS released the Fresh Start Initiative which means it’s easier than ever to get an offer in compromise or payment agreement approved. The IRS is prepared to negotiate deals with those owing taxes, and you should take advantage of this particular time.
You don’t want to wait for a “good” year.

One of the most common reasons people avoid paying back taxes or filing late is because they think it’s best to wait until they’re more financially stable. While this kind of thought process makes sense logically, you actually want to settle with the IRS when your income is lower. Having a lower financial situation makes it easy to negotiate an offer in compromise. If you wait until you’ve seen an increase in income, the IRS will be less willing to accept anything other than a full payment.

The longer you wait, the more you’ll owe.

Once again, it doesn’t pay to wait until you’re more financially comfortable to resolve your tax issue. If you’re waiting until you earn more income, you’ll end up owing a lot more than you did before. Every month you wait to file your return, a penalty of 5% of the total amount owed is added to your payment account. You would have to earn substantially more to make up for this difference, and it will only hurt you in the end when you do decide to pay after waiting.

You don’t want to lose your refund.

You only have three years to claim a refund from the IRS. Oftentimes, the IRS will delay action until three years after the filing deadline so you are unable to claim your tax refund if any was owed to you. This can mean losing a lot of money, depending on your refund situation. The cost of waiting is far greater than the cost of acting now.

You can’t avoid the inevitable.

The IRS will catch up to your tax problem, and that means you can’t wait forever. It’s best to be proactive with the IRS rather than reactive. That means coming up with a tax plan today that takes into account your unique financial situation. If you avoid acting, the consequences are far worse. You might face garnished wages, a lien, or damaged credit score.

If you own your own business, these consequences can be even greater. Failing to file with the IRS as a business owner means the IRS will file on your behalf. If this happens, the IRS will not take into account any deductions or business expenses, and you will be placed in the highest tax bracket for your situation.

You don’t have to face your tax problem alone. Speak to a tax advisor today about how to best rectify your situation with the IRS and mitigate all damages. The only wrong action is taking no action when it comes to solving your tax problems. An expert tax advisor can mediate with the IRS on your behalf and create a solution that works for everyone.