Individuals who find themselves with income tax debt often set up an installment payment arrangement with the IRS. At first glance, a payment agreement might appear to be the best option to resolve an unpaid balance due. However, individuals with overdue tax debt should take a second look at the tax return that created the outstanding balance to ensure that the tax return itself is correct.
Tax filers sometimes miss out on deductions to which they are entitled. Certain tax deductions provide a greater amount of financial leverage than others, so prior tax returns should be examined for unclaimed deductions. If a problem is found, a return can be amended if it achieves a satisfactory reduction in the balance due. For example, there are two potential components of a tax return that can measurably shrink the amount of a balance due or even result in a refund.
A child who lived with you for over half of a prior year may be claimable as a dependent for that year. The definition of a qualifying child includes, among others, a grandchild, niece, or nephew. If not claimed by one of their parents, the addition of a qualifying child may allow you to claim both the child tax credit and the earned income credit.
American opportunity credit
Many tax filers are not aware of the broad availability of the American opportunity tax credit. If you or your children were full-time college students in a prior year, a tax credit may have been available for out-of-pocket tuition paid. Eligible expenses for the credit also include tuition amounts borrowed through loans. If the credit was missed, you need to locate the Form 1098-T provided by the educational institution to document your eligible costs incurred.
Amending a tax return
A tax return can be amended up until three years after the due date of the original return. An amended return cannot be e-filed, so it takes several weeks for the IRS to process the mailed form. In the meantime, actions must be taken to avoid IRS collection efforts.
The IRS collection process generally follows a predictable sequence of steps. Any correspondence you receive is likely to include a deadline for taking action, along with a contact phone number. Even if an amended return is being processed, you may still need to enter into an agreement in order to satisfy collection requirements.
A tax resolution service can assist you in dealing with the IRS while also amending prior tax returns if possible. If the unpaid tax is reduced by an amended return, it might become possible to immediately pay off any remaining balance instead of continuing with an installment agreement. For more information, contact companies like Bronson Law Firm PC.