Top 7 IRS Tax Problems People Are Facing in 2025 | How to Resolve Them

Introduction

The IRS is ramping up enforcement efforts in 2025 with new technologies, tighter compliance rules, and increased funding. As a result, many taxpayers—individuals and small business owners alike—are finding themselves entangled in unexpected tax issues. Whether it's a delayed refund, a surprise notice, or growing tax debt, these problems can feel overwhelming.

The good news? Most IRS-related issues have clear, actionable solutions. In this blog, we break down the seven most common IRS tax problems Americans are facing right now and how to fix them—before they become bigger headaches.

Unfiled Tax Returns

Failing to file your taxes, even for a single year, can trigger a cascade of problems with the IRS. Unfiled returns may result in penalties, interest, and the IRS filing a Substitute for Return (SFR) on your behalf, often without deductions or credits you're entitled to. This can inflate your tax bill significantly.

How to resolve it: File your missing returns as soon as possible—even if you can’t pay the full amount. The IRS is more willing to work with taxpayers who voluntarily file than those who continue to delay.

Back Taxes and Outstanding Balances

Owing the IRS can be stressful, especially when interest and penalties start to pile up. This can happen due to underpayment, self-employment income without quarterly payments, or changes in income that weren’t reported properly.

How to resolve it: You have several options, including setting up an Installment Agreement, applying for an Offer in Compromise (OIC) to settle for less than what you owe, or even requesting temporary Currently Not Collectible status. Explore your payment plan options on the IRS Payment Plans page.

CP2000 or Mismatched Income Notices

The CP2000 notice is issued when the IRS detects a mismatch between what you reported on your return and what employers or financial institutions reported to them. This is especially common with freelancers, gig workers, or those with multiple 1099 forms.

How to resolve it: Do not ignore the notice. Review it thoroughly and compare it with your tax documents. If you agree, pay the balance. If not, respond with proper documentation to dispute the difference. For more info, visit the IRS page on Understanding Your CP2000 Notice.

Tax Identity Theft

In 2025, tax-related identity theft remains a serious concern. It typically occurs when someone files a fraudulent return using your Social Security number to claim a refund. Victims often find out when their legitimate return is rejected or they receive unexpected IRS letters.

How to resolve it: File an Identity Theft Affidavit (Form 14039) and report the incident immediately to the IRS. You may also need to file a police report and alert the credit bureaus. Visit the IRS Identity Theft Central for full instructions and next steps.

IRS Collections and Wage Garnishments

When taxes go unpaid long enough, the IRS can take aggressive action—including garnishing wages, placing levies on bank accounts, or filing federal tax liens on your property. These actions can severely impact your financial life and credit.

How to resolve it: Act quickly. You may qualify for a Collection Due Process Hearing, or be able to stop garnishments by entering into a payment plan. If your financial situation qualifies, you can also request Currently Not Collectible status, pausing all collection activity.

Payroll Tax Issues (For Small Business Owners)

Business owners who fail to deposit or report payroll taxes can face the Trust Fund Recovery Penalty (TFRP), which allows the IRS to hold you personally liable. In 2025, stricter IRS enforcement will lead to more investigations in this area.

How to resolve it: Address the problem immediately. Make any missed deposits and bring payroll filings current. If you have already received notice of an audit or TFRP investigation, consult a tax professional to defend your case. Read more about employment taxes on the IRS page.

Incorrect or Missed Tax Credits

Many taxpayers lose money each year by missing out on valuable tax credits like the Child Tax Credit, Earned Income Credit, or education credits—often because of documentation errors or eligibility misunderstandings.

How to resolve it: If a credit was wrongly disallowed or missed, you can file an amended return using Form 1040-X to claim what you are entitled to. Be sure to include supporting documentation. Visit the IRS guide to filing an amended return for a full walkthrough.

Conclusion

Tax problems can feel overwhelming—but you are not alone, and there are proven strategies to resolve nearly every situation. The key is acting promptly and, when needed, working with a qualified CPA, enrolled agent, or tax attorney who understands IRS processes.

Whether you are dealing with a CP2000 notice, mounting back taxes, or payroll tax issues, the sooner you take action, the more options you will have—and the less you will pay in penalties over time. If you are unsure where to start, begin by reviewing the IRS resources linked above or schedule a consultation with a certified tax professional.