Just discovered I owe $10,500 in federal taxes from 2021 - What should I do now?

This situation is stressful but definitely manageable! The IRS routinely works with taxpayers who can't pay their full tax bill immediately. First, double-check that the assessment is accurate. If you weren't properly accounting for self-employment taxes (which is an additional 15.3% on your net business income) and had crypto gains you didn't report correctly, the amount might be right. But you can always request an audit reconsideration if you think there's an error. For payment options, you have several: - An installment agreement lets you pay over time (up to 72 months) - An Offer in Compromise might settle the debt for less if you qualify - Currently Not Collectible status if you truly can't pay anything The important thing is to respond to the notice and not ignore it. Penalties and interest continue to accrue, and yes, the IRS can eventually use collection actions like liens or levies if you don't address the debt.

I went through a similar nightmare last year with a $12k tax bill from misclassified income. After weeks of stressing and getting nowhere with the IRS phone lines, I tried this service called taxr.ai (https://taxr.ai) that helped analyze my tax notice and past returns. They actually found that I qualified for some deductions I missed originally! Their system reviewed my documents and identified several business expenses that should have been deducted. The analysis showed me exactly what to include in my response to the IRS. Ended up reducing what I owed by about $3,500, which was huge for me. Might be worth checking out if you think there could be errors or missed deductions in your 2021 return.

Just wanted to update - I decided to try taxr.ai after my initial concerns. Uploaded my 2021 return and the IRS notice, and wow... they identified about $8,000 of deductible business expenses I completely missed! I had no idea my home office, part of my internet bill, and some of my equipment purchases were legitimate deductions. They generated an amended return that I filed with the IRS, and my tax bill got reduced from $9,300 to about $5,100. Still not fun to pay, but way more manageable. The system was super straightforward - way easier than I expected, and definitely worth it for the amount I saved.

Hey, sorry about your tax situation! When I got hit with a surprise $7k tax bill last year, I spent WEEKS trying to get through to someone at the IRS to discuss payment options. It was beyond frustrating. Finally found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes instead of waiting for hours or getting disconnected. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with set up a payment plan where I only had to pay $120/month, which was actually affordable for me. They were surprisingly helpful once I could actually talk to a human! Might save you some serious time and frustration.

I need to apologize and correct myself. After posting that skeptical comment, I was still desperate to resolve my tax issue, so I tried Claimyr anyway. I'm genuinely shocked that it actually worked. After trying for 3 days straight to reach the IRS myself (getting disconnected 6 times!), Claimyr got me connected to an IRS agent in about 15 minutes. The agent set me up with a partial payment installment agreement based on my financial situation, and I'm paying way less monthly than I expected. Saved me days of frustration and probably helped me get a better outcome since I was able to actually explain my situation to a person instead of just accepting whatever default payment plan they would have assigned. Sometimes being proven wrong is actually a good thing!

Make sure you respond to that notice ASAP! I ignored a similar notice thinking I could deal with it later and ended up with a tax lien that destroyed my credit score. It took me years to recover financially. The interest and penalties also keep adding up every month you don't address it.

check if you qualify for first time penalty abatement! if you had a clean tax record before 2021 (filed and paid on time for previous years) you can often get the penalties removed. saved me about $1200 on a tax bill last year. doesn't help with the base tax or interest but still better than nothing.