Dealing with tax debt can feel daunting, but taking the time to organize your financial information is a crucial first step toward finding relief. This free checklist from Taxpayer Network guides you through gathering the details needed to understand your tax situation and prepare for solutions like IRS payment plans, debt settlements, or penalty reductions. Complete each step below to build a clear picture of your finances, and when you’re ready, take our 60-second quiz to connect with a tax relief expert who can help you take the next steps.

• What to Do: Locate copies of your federal and state tax returns for the past 3-5 years, including any you’ve filed and those you haven’t. If you don’t have copies, you can request transcripts from the IRS website (IRS.gov) or by filing Form 4506-T. Make sure to note any years where you didn’t file at all.

• Why It Matters: Your tax returns provide a detailed history of your income, deductions, credits, and taxes owed over the years, which the IRS uses to assess your debt. They also reveal potential errors or discrepancies (like underreported income) that might be contributing to your tax issues. Having these on hand helps you or a tax professional accurately calculate your total debt, identify missing filings, and determine eligibility for relief programs like an Offer in Compromise.

• What to Do: Find every notice, letter, or email the IRS has sent you over the past few years, such as CP2000 (underreported income), CP501 (balance due), or CP90 (intent to levy). Check your email, mailbox, or online IRS account for digital copies, and organize them by date. Note the deadlines mentioned in each notice.

• Why It Matters: IRS notices outline exactly what the IRS believes you owe, including taxes, penalties, and interest, and they often include critical deadlines for responding—sometimes as little as 30 days. Ignoring these deadlines can lead to escalated actions like wage garnishments, bank levies, or liens on your property. Having all notices in one place ensures you don’t miss important details and helps a tax professional understand the full scope of your IRS interactions.

• What to Do: Create a detailed list of all your monthly income sources for the past 6-12 months. Include wages from your job (check pay stubs or W-2s), self-employment income (from 1099s or profit/loss statements), rental income, investment dividends, or other earnings like alimony or gig work. Be as precise as possible, noting any fluctuations.

• Why It Matters: The IRS evaluates your ability to pay based on your current income, which directly impacts your eligibility for relief options. For example, a payment plan’s monthly amount is based on what you can afford after expenses, and an Offer in Compromise requires proving financial hardship. Accurate income documentation ensures the IRS doesn’t overestimate your payment capacity, which could lead to unaffordable terms or denial of relief.

• What to Do: Write down all your monthly expenses for the past 3-6 months, including essentials like rent or mortgage, utilities (electricity, water, internet), groceries, transportation (car payments, gas, public transit), insurance (health, auto), and child care. Also include minimum payments on debts like credit cards, but exclude non-essentials like entertainment or dining out.

• Why It Matters: The IRS compares your expenses to your income to determine what you can realistically pay toward your tax debt. By documenting only necessary expenses, you show the IRS your true financial picture, which can help secure a manageable payment plan or prove hardship for debt settlement. Missing or inflated expenses can lead to higher payment demands, making relief harder to achieve.

• What to Do: Make a comprehensive list of your assets, such as savings accounts, retirement accounts (e.g., 401(k), IRA), real estate, vehicles, or valuable personal property (e.g., jewelry, collectibles). Then, list your debts, including mortgages, car loans, student loans, credit card balances, and medical bills. Include current balances and monthly payments for each. 

• Why It Matters: Your assets and debts play a key role in IRS relief decisions. For an Offer in Compromise, the IRS calculates your “reasonable collection potential” by considering the value of your assets and your disposable income after debts. A clear picture of your financial obligations can demonstrate hardship, potentially reducing your debt, while unreported assets might lead to rejected applications or higher settlement offers.

• What to Do: Review your records to identify any tax years where you haven’t filed a return or where you filed but didn’t pay the full amount owed. Check for missing W-2s, 1099s, or other tax documents to confirm which years are incomplete. If you’re unsure, you can request a Wage and Income Transcript from the IRS to see what they have on file.

• Why It Matters: Unfiled returns or unpaid balances are often the root of tax debt, and they accumulate penalties and interest over time, increasing what you owe. The IRS typically won’t approve relief programs like payment plans or debt settlements until all required returns are filed. Identifying these gaps allows you to address them upfront, which is often the first step to resolving your debt and avoiding further IRS enforcement actions.

• What to Do: Check your bank statements, canceled checks, or online payment records for any payments you’ve made to the IRS in the past 3-5 years. You can also request an Account Transcript from the IRS to see a record of payments and credits applied to your account. Compare this with what the IRS claims you still owe in their notices.

• Why It Matters: Ensuring your payment history is accurate prevents you from overpaying or being charged for amounts you’ve already settled. Discrepancies between your records and the IRS’s can lead to incorrect debt calculations, delaying your relief process. A clear payment history also helps a tax professional verify your remaining balance and negotiate the best possible terms for resolution.

You’ve taken an important step by organizing your tax debt information—great job! Now, let a tax relief expert help you turn this preparation into action. Take Taxpayer Network’s free 60-second Tax Relief Quiz to see if you qualify for IRS relief programs like the Fresh Start Program, payment plans, or debt settlements. We’ll match you with a trusted partner who can guide you toward financial stability—all at no cost to you.