There are two things in life that we cannot possibly escape – death and taxes. If you have an outstanding tax bill, it’s not unusual to feel uneasy and possibly stressed out until you get the burden off your back. Although the annual tax lien filed by the IRS has fallen by more than 50%, according to the IRS data book, there were more than 14 million open tax debt cases against businesses and individuals that entered 2018. Despite being in one of the biggest economies in the world, a lot of Americans find it hard to pay their taxes on time. If you are experiencing the same problem, it does not mean the end of the world. There are certain steps that you can take to mitigate the impact that unpaid taxes can have on you. Read on.
Don’t Ignore It
Even if you ignore the issue, the IRS certainly will not. If you are unable to pay your taxes at the moment, you must not forget to file the return or for an extension on time. The IRS levies a 5% penalty on the tax you owe per month up to a maximum of 25% of the balance. When you are unable to the full tax amount, the IRS levies an underpayment penalty of 0.5% to 1% per month of the balance you owe up to 25% on your concurring underpayments. Failing to file your taxes or underpaying will rapidly increase the debt you owe to the IRS.
Understand Your Situation
The IRS does not forgive debtors. For individuals experiencing true financial hardships, Form 656 or an application for an “offer in compromise” may be a lifesaver. You need to understand your situation before going ahead to file for an “offer in compromise”. If the IRS determines that you have been making enough income and have assets, you may not be eligible for an “offer in compromise”.
Handling Tax Debt on Your Own
If your tax debt is below $10,000, you might want to handle the issue on your own, rather than pay someone to help you out. You can file Form 9465, which is an IRS application to issue an installment payment plan on your outstanding debt. The IRS will agree to issue the service to taxpayers who owe less than $10,000. The plan allows you to pay off the debt along with interest and penalties over 36 months.
Hiring an Attorney
If you owe the IRS more than $10,000, hiring an attorney could be in your best interest. There are different payment plans to extinguish the outstanding debt but an experienced attorney can help you get better terms. It is of the utmost importance that you pay attention to the attorney that you hire. Many people are scammed by people claiming that they can help settle tax debts for a fraction of what is owed. Before hiring an attorney, make sure that you learn about their background and experience in helping people with similar cases.
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Streamlining the Debt
Taxpayers owing large debts can arrange an agreement for streamlined installments. The Fresh Start Program qualifies taxpayers with up to $100,000 in debt for such an agreement. However, there are certain prerequisites that you need to meet to qualify for this agreement plan.
If you are stuck in a scenario requiring you to clear your IRS tax debts. The above-listed steps can give you a basic rundown of how you can pay your tax debts. Filing tax returns and clearing tax debts can be a cumbersome process, which is why hiring an IRS tax debt attorney can be helpful. If you are looking for IRS tax debt help, Nick Nemeth has got you covered. Fill out our Contact Form or simply call us at (972) 426-2553 for a free consultation.