Overcoming Tax Fear: What to Do If You Have Been Avoiding Taxes

Introduction

The IRS estimates that roughly 10 million people don’t file their taxes each year. If you have been avoiding your taxes, you’re not alone. This avoidance is commonly known as tax fear. Tax fear is the anxiety or avoidance behavior stemming from the stress of dealing with taxes. 

This anxiety and avoidance can come from concerns about money or the ability to pay, perceived lack of knowledge, or fear of consequences of having not filed or making a mistake. Once you’ve identified that you have tax fear, it’s important to know two things. First, it’s a common fear. Second, you can manage it with the right steps.

Why Tax Fear Happens

As you get ready to face your tax fears, it’s important to know why you might have them. One key psychological principle that can explain tax fear and avoidance is the Ostrich Effect. This is the tendency to avoid information or tasks that feel overwhelming or negative. The Ostrich Effect can cause an individual to ignore important tasks because of how they make them feel. 

In the case of taxes, this can lead to avoidance. Other reasons people avoid taxes include the fear of owing money, the complexity of the tax filing process, embarrassment over missed deadlines, or the inability to pay. 

It’s important to know that all these fears are normal and common. Taxes are a stressful issue for lots of people. Even if you’ve been avoiding them, it’s never too late to act and work on your taxes. Most times, starting to move forward can help your fear grow smaller.

3 Steps to Overcome Tax Fear

1. Acknowledge the Issue

You can’t face your fear until you accept that it exists. So, the first step to overcoming your tax fear is acknowledging it. Be honest with yourself. Recognize and name your tax fear and the avoidance it creates to get started.

2. Start Small

When you’ve been avoiding something, it can seem impossible to get started because the task seems so big. Start small. Instead of trying to tackle your taxes all at once, start by gathering the documents you need, or filing for one missed year to make the process less daunting. This is a great time to create micro goals. Write out the different small steps you need to take to complete the task, then tackle one. Often just starting can build momentum to push you forward.

3. Seek Support

A key step to overcoming your tax fear is understanding that you don’t have to do it alone. There are free resources like VITA that can help you file your taxes. You can also look for a tax professional who specializes in resolving unfiled returns. Having a person in your corner can make the whole process feel less daunting.

What Happens If You Owe?

One of the big reasons people avoid filing their taxes is they are afraid they may owe money. This is especially scary if you are in a financial situation where you don’t have the means to pay. The good news is that the IRS offers options to help people catch up on taxes they owe.

  • You could request a payment plan from the IRS. This extends the time you have to pay what you owe. There are two timeframes on the payment plans offered. You can select a short-term payment plan that gives you 180 days to pay what you owe, or a long-term installment plan. With the short-term plan, your payment is due in full after 180 days. With the long-term installment plan, you pay a monthly amount until you’ve paid off what you owe.
    • To find out more about the payment plans and to apply, check out the IRS website.
  • You can also ask the IRS for an Offer in Compromise. An Offer in Compromise allows you to settle your tax debt for less than you owe. If you can’t pay your full tax bill or paying it would cause you financial hardship, you can see if you qualify for an Offer in Compromise. For more information, click here. 

Reassurance: It’s important to remember that the IRS prioritizes working with taxpayers to resolve issues rather than punishing them. If you are struggling with taxes you owe, reach out to the IRS to see what options are available to you.

Benefits of Facing Tax Fear

Financial Relief

Address issues sooner to avoid accumulating penalties and interest. When you don’t pay your taxes on time, the IRS adds taxes and penalties to your bill. By tackling your taxes and facing your tax fear, you can avoid these penalties and interest and save yourself money in the long run.

Peace of Mind

Taking control of your taxes reduces anxiety and empowers you in future financial decisions. Worries and fears grow the longer we avoid them. By taking steps now to get back on track with your taxes, you can reduce your anxiety around your finances. It can also empower you to make future financial decisions because you know you are capable.

Fresh Start

Through offering the Offer in Compromise program, formerly called the Fresh Start Initiative, the IRS has ways to help you catch up. Wiping the slate clean through these programs can allow you to start over and face your tax fears head-on in the future.

Conclusion

Facing fears is never easy. But in the case of tax fear, the benefits outweigh the costs. Tackling your tax fears can save you money, help you get your financial house in order, and give you the confidence to continue your financial journey. It’s important that you face this fear head-on. The good news is that you don’t have to do it alone. 

📲Action Item: Start today by reaching out for help to start your filing process. You can look for free local resources like VITA or other tax assistance programs. You can also look for a tax professional in your area. The key is to find help and face your tax fear!