A simple guide to resolving your tax debt issues with the IRS
IRS (Internal Revenue Service) is an authority in the US under the United States Department of the treasury with mandates to collect employment taxes and individual income taxes. Now, tax debt issues are quite common in the US, affecting both individuals and businesses. For example, in 2018, over 14 million Americans had tax issues, according to the IRS. Tax debt issues are scary, given they can cause financial and property loss. So how can you resolve these issues? Well, we have compiled a simple guide to help you resolve your tax debt issues with the IRS.
What causes tax debt issues?
The significant causes of tax debt issues are penalties and interests. Yes, every year, the IRS charges close to 40 million on penalties. The following are common reasons why taxpayers are penalized:
Failure to pay tax debts
If you fail to pay your taxes, the IRS charges a 0.5-25% penalty on your debt. Over time, the IRS also starts charging interest on your debt. Thus with time, your total debt raises, prompting the IRS to follow up with you.
Unfiled tax returns
As you know already, each year, you are required to report your income by filing a tax return. Unfortunately, close to 7 million taxpayers fail to file their tax returns, and this attracts hefty penalties every year.
Your employer under withholding tax
Your employer has to withhold taxes from your salary, as stated by the law. In the event they withhold less than they should, it can cause tax debt issues as you owe the IRS.
Estimated tax payment
Contrary to the employees whose taxes are paid by their employers, self-employed people are responsible for paying their taxes depending on their income or estimated tax. Because they make their payments, they may forget to do so and this can attract enormous penalties. If you also make a tax underpayment, maybe because you are not able to calculate your estimated tax, you can face heavy penalties from the taxman.
How to resolve tax issues with IRS
Ensure that you file our returns
For starters, do not skip filing your returns because of your tax debt. This will save you on more penalties that could be inflicted by Uncle Sam.
Request the IRS for an offer in compromise
If you cannot pay the whole amount that you owe the IRS, perhaps because it will impose financial hardship on you, then you can request the IRS for an offer in compromise. An offer in compromise allows you to pay a lump sum amount for the tax bill, which is less than the full amount that you owe the IRS.
Consider paying your tax in instalments
You can resolve your tax debt issues through making a reasonable instalment agreement with the IRS, especially if you cannot pay your debt in 3 years or less. However, the instalment payment deal is only applicable to taxpayers who owe the IRS less than $10,000 which is inclusive of penalties and interest.
Delay payments
If you are in a bad financial state and you are not able to pay your tax debt, you can request the IRS to delay the collection of the tax temporarily. However, this delay still attracts penalties and interest until you settle your tax debt. So, immediately, you can pay the debt, start working on it to avoid penalties and interests.
Seek professional assistance
Some complicated tax issues will require professional help to resolve. If the IRS comes after you or your business because of debt issues, then you can contact a law firm for tax investigations to help. The lawyers will help investigate if the debt is legit and recommend the best course of action. In fact, you are better off with a skilled tax attorney on your side as they are experts with matters law and tax. They will offer professional advice and recommend the most palatable solution for your IRS debt issue.
Follow your payment plan
Adhere to the settlement plan you agree on with the IRS to avoid additional penalties and interests. Also, the IRS can take extreme actions like seizing of property or finances from your bank accounts if you do not stick to your plan.
Final word
For one reason or another, you can find yourself in tax debt issues with the IRS. If it happens, do not wait for too long. Investigate to seek if the tax debt is legit and immediately talk to the IRS so that you can establish the best options to fix the problem. It is important that you seek professional assistance from a skilled lawyer to help resolve the issue. The lawyer will evaluate the root cause of your problem and offer an informed solution.