- Check your original tax returns and contact the taxpayer advocate for your local area. Look for errors and possible deductions missed from prior years. Your taxpayer advocate can help you with this and provide advice on possible missed deductions depending on your situation. This may significantly change the amount you owe.
- Contact the IRS as soon as possible and try to pay as much of the bill as you can. If you owe less than $10,000, you can resolve your tax debts on your own. However, if you owe more than $25,000, you should seek the help of an experienced tax professional. Make sure the tax professional is a certified public accountant (CPA), enrolled agent or tax attorney. CPAs and attorneys are limited by the state in which they practice. They are knowledgeable about the rules, regulations and, in some cases, loopholes that people with large amounts of IRS debt can employ in order to reduce their tax bill. They may also have contacts in both the regional and national IRS tax office, which can help expedite your case.
- If you owe less than $10,000, request an installment agreement from the IRS. An installment is usually a monthly payment plan. The IRS offers both short- and long-term payment plans to pay off debt. You can also apply for an Offer in Compromise. This program will allow you to negotiate a lower rate for your debts, but you must be able to pay off the entire amount in one lump sum. In some rare cases you can also request a deferral. In this case, the IRS may defer requesting payment for one year. There's also the option of Chapter 7 or 13 bankruptcy, but this is a worse-case scenario and while your IRS debt may be reduced it is rarely completely eliminated.
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