Respond immediately if you receive a notice from the IRS. Interest and penalties will be added to your account from day one. If you wait long enough, your wages will be garnished or your bank accounts will be frozen. Call the number listed on the notice and find out what the problem is. If you did make an error on your tax return and you do not have enough money to pay the entire amount due, work out a payment plan. Remember, the longer you draw out the payments the more interest you will have to pay, so it is to your advantage to pay off the taxes as soon as possible.
Try to break even. Getting a large tax refund each year might seem like a good way to force yourself to save money. But who wants a savings account that earns zero interest and that you can't get to in an emergency? If you get a large refund every year, go to your personnel office and change your withholding. Then set up a savings account and have the extra money deposited directly into the savings account. By the end of the year, you will have the amount of your tax refund -- plus interest.
By the end of the year, you'll have the amount of your tax refund -- plus interest. For more tax information and additional links, check out the next page.
*This article was adapted from "Inside Info: The Secrets You Should Know" and "The Frugal Almanac," both published by Publications International, Ltd.