Tim’s Tax News on the Tenth – February 2024

Timothy M. Hughes • February 10, 2024

Some People Accustomed to Getting a Tax Refund May be Surprised This April When They Instead Discover They Have a Balance Due

A magnifying glass with the word taxes written on it

As of the end of April 2022, over 18 million individual taxpayers owed the IRS $316 billion in overdue taxes.



And while the dollar amount and the reason for the tax debt people owe varies widely, one thing is sure this year, the IRS will be aggressively going after unpaid taxes. Using new funding from the Inflation Reduction Act, IRS workers will be focused on collecting unpaid taxes and the pause in their collection efforts during the pandemic is now a thing of the past.


There are two main reasons for the expected “file-and-owe” surprise trend. First, for workers who get a steady paycheck, taxes are withheld, but the withholding might not be enough if someone gets a higher-paying job or has investment gains. In such cases, if taxpayers did not do a withholding checkup or complete a new W-4 withholding form with their employer, they may be surprised to learn they owe taxes beyond what was withheld in their paycheck.


Another reason many people may be surprised come this April is the rise in short-term or temporary jobs and part-time positions filled by independent contractors and freelancers, a/k/a the gig economy. Gig workers have to pay taxes throughout the year in quarterly estimates, and if they fail to do so, they will definitely be surprised this April when they discover they not only have a tax balance due, but possibly an underpayment penalty as well.


If you happen to be one of many caught off guard and learn that instead of a refund, you now have a tax balance due this April, do not lose hope, this is the time to be proactive. One way is to pay up or negotiate with the IRS before the agency comes calling. The danger of owing the IRS back taxes is that the debt will keep growing. The longer you wait to pay, the more the penalties and interest will accrue until the debt is paid in full. If you are unable to pay in full, the IRS may offer payment plans, and, in special cases, taxpayers can settle their tax debt for less than what they owe.


Taxpayers who owe money to the IRS get an initial balance-due notice, followed by a series of more aggressive notices demanding payment. The IRS sends out annual balance-due reminders to anyone with a tax debt. Erin Collins, the national taxpayer advocate, and IRS watchdog, has called on Congress to increase those notices to quarterly. “By sending infrequent billing notices, the IRS received fewer payments from taxpayers, and as a result, more taxpayers face aggressive IRS collection actions such as levies and liens,” she wrote in her latest annual report to Congress.


As the IRS ramps up their collection efforts, tax liens and levies will be their key enforcement tools. And failure to pay back taxes will only result in penalties and interest accruing, causing your tax debt to just keep growing. So be proactive and do not ignore those IRS collection notices, because the longer you wait the worse the tax debt becomes.


If you would like more details, please do not hesitate to call our office. Our office has been successful in helping taxpayers with IRS and IDOR collection problems for over 30 years. If you have a tax or debt problem, please contact me at 847-705-9698 or thughes@lavellelaw.com and find out how we can help you.


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