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Bills are a fact of life, though some require more urgent attention than others. Ignore your brother-in-law because you still owe him $50 from last year’s poker game, and you’ll get the cold shoulder. Ignore your debt to Uncle Sam, and the consequences will be much more costly.
According to a poll by the research firm Civic Science, 43 percent of U.S. adults anticipate owing the IRS this year; 57 percent expect a refund. Unfortunately, millions of Americans often fall behind with their bills. IRS data indicates that in 2022, taxpayers owed over $120 billion in back taxes, penalties and interest.
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Some people avoid or delay filing because they find the process overwhelming. Others underreport the amount they owe in error, or they file their return late or not at all. Or they may be thrown off-kilter by the death of a spouse or other loved one, a serious illness, divorce or job loss.
The IRS points out that too often, taxpayers make simple common mistakes that might be easily avoided with more careful attention. Fortunately, help is available if you need it.
Avoiding big problems and more debt
Be sure to do whatever it takes to file your return properly, on time, and to pay what you owe. Taxpayers who do fall behind, or deliberately fail to report income, might be subject to the collection of back taxes, interest and stiff penalties such as a garnishment on their wages or a lien on their homes. They may also subject to penalties and interest until the tax is paid.
Make no mistake: The IRS will be in touch if there’s a question with your taxes. Remember, the IRS will never call and demand odd forms of payment, such as gift cards. The IRS typically sends a letter.
What if you’re expecting a refund, but owe instead? Would you go into debt? The results of a survey by Bankrate show that many people would. While 44 percent of the respondents said they would pay an emergency expense of $1,000 from their savings, nearly a quarter — 22 percent — said they had no emergency savings. More than a third — 35 percent — said they would borrow the money, including 21 percent who said they would cover it with a credit card and pay it off over time.
4 IRS payment options
Fortunately, there are ways to work with the IRS. You’ll want to file on time, pay as much as you can and get some expert advice as you explore these possibilities.
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