Things are going fine and all is well one day, until you decide to check the mail. You see a letter stamped Internal Revenue Service, and you know that this probably isn't a good sign. In fact, when you get into the content, you find out that you owe taxes to the government from two years before. What do you do, and how do you handle it? There are solutions, but none of them are guaranteed to be painless.

Deal with it immediately. If you owe money to the IRS, take action quickly. If you have the money, pay the debt as soon as possible to avoid incurring extra interest and penalty charges. Generally, the tax debt itself is a lot less daunting than the fees that the government can and will, impose on you. If the tax debt is too large to handle at once, the IRS will conveniently negotiate an installment agreement. This allows you to pay a set monthly amount or more when you have it, over a period of time. The only problem is that interest continues accruing, leaving you paying the debt for a long time. If the installment agreement is what you can afford, then you have no choice, but this isn't preferable. On the other hand, if something seems inaccurate to you, there's a way to deal with that, too.

Dispute it. If there is a question about the debt, or you think there is an error on the government's part, you have time to dispute it. Send notification of the error in writing. This requires the government to re-analyze your taxes and respond within a specified time period. However, the IRS audit will generally work in favor of them, and for you to figure out how the IRS determined the debt, is probably as easy as doing a 20-step algebraic equation with a blindfold. You might have to pay this time, but you can avoid it in the future.

Always hire a professional to do your taxes. Many people feel that they shouldn't have to spend a lot of money when filing taxes, especially if they have fairly uncomplicated finances. This is where a many people get in trouble. Accountants and CPA's spend a substantial time in school learning tax doctrine, and they still have to take courses throughout their career to keep abreast of the endless changes. That should show you how complicated taxes can be. Let them handle the filing, and if it's a well known company, they generally absorb the cost of errors they make.