If you discovered that you owe money to the IRS but can’t come up with the money to take care of the debt, understand you have options. Having options to take care of your tax bill is to your advantage. Without a doubt you need to exercise your right to these options and fast. The last thing you want to do is avoid the IRS.
Owning money to the federal government is like no other debt you are responsible for paying. The IRS has some pretty big guns when it comes to collection practices. They can literally freeze your finances and life until your debt is satisfied. If the debt goes unpaid, your wages could be garnished, liens could be placed on your home and property all in pursuit of the debt. The worse thing you can do is not file tax returns if you are afraid you cannot pay them.
Communication when you owe taxes is instrumental to staying out of trouble with the federal tax office. If the IRS is made aware of your inability to pay due to medical reasons, job loss, or the other legitimate cause of financial stress, they will open plenty of doors for you to get help. The IRS understands that people have a variety of issues and there is no one-size-fits-all solution to helping people pays their back taxes. But they cannot help you with your tax issues if they don’t know what problems you are having that prevent you from settling your debt.
If you do not contact and stay in communication with the tax office, you are subjecting yourself to a lot of legal and financial hassles. Not only will you still be responsible for the original debt, you’ll also amass plenty of fees and penalties for ignoring your debts.
The IRS has set up several options for helping people take care of their tax debts. They realize there are different circumstances among different people necessitating a variety of options to get rid of tax debts. The following is a list of IRS offerings people can utilize for resolving their debts.
There are several installment agreements that can be used which allow payments to be made over a period of time, generally in monthly increments based on what the debtor can pay. The installment agreements differ in the time you have to pay back the money and are also based on the amount of taxes you owe. Contact the IRS office or visit the IRS website to determine which agreement suits your needs.
If you can provide to the IRS that you are in serious dire straits financially, you may be eligible to have your account put on hold temporarily. The process is not an easy one and you’ll need to provide significant documentation proving your hardship situation. The IRS will need to review your finances and make the hardship determination. If you are eligible, the IRS will check in with you every couple of months to see if your finances have improved enough that you can make payments toward your tax debts.
This method is a tax settlement opportunity for those who are really in financial trouble. It allows you to pay back less than the original amount owed in back taxes. You must prove to the IRS that the amount owed will likely never be paid back due to financial concerns. Because you can pay much less to settle your debt, the Offer in Compromise is a very popular choice among those who owe the IRS and the government is very particular about who they deem as eligible to settle.
If you pay taxes quarterly and find you cannot afford to make the upcoming payment, get in touch with the tax office immediately to make alternative arrangements. If you let your debt bypass you, you will end up owing way more money than the original balance. Don’t hide from the IRS for any reason. They are an agency that is willing and able to help you make it through your tax problems but can only be of service if you keep them in the loop.
If you owed taxes for the first time ever, you will need to nip it in the bud and speak with your payroll department at work to change the status on your W-2’s. You never want to owe money to the federal government and by adjusting your withholdings you can avoid owing money each year. Your payroll representative can help you do the math to ensure you either break even or get a refund. Do what you can early to prevent mistakes come the next tax year. Prepare by accounting for your deductions, your expenses, and other information throughout the year and not only in the weeks before tax time.
Word of caution on a refund: You essentially want to aim to break even as getting a refund means you are loaning money to the government for free. They are paying you nothing to use your money – money you likely will benefit from greatly if it is put back into your paycheck. [promoslider]
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