Every adult employed person in the US must fill out a tax file once a year and settle their debt to the state. That’s a mandatory expenditure for anyone with a regular income, and that money goes to many socially useful things such as infrastructure renewal, health programs, Social Security, etc.
The amount you pay each year changes, and it mostly depends on your income and filing status. There are also a few things you can learn more about at this source. Either way, you can’t and shouldn’t avoid this obligation because it can bring numerous financial and legal consequences.
However, you can’t predict many life situations, so it can happen to everyone to be late with the tax payment or don’t have enough money to settle this debt. In that case, interest and fees are added to that debt, quickly accumulating to an outstanding amount. As soon as the IRS notices you haven’t settled your obligations towards them, the calls start.
Luckily, there is a solution, even if you can’t pay off the entire debt within the agreed deadline. Indeed, the IRS has a lot of rights and priorities when it comes to settling their claims. But remember that you, as a taxpayer, also have certain rights. It’s a good idea to familiarize yourself with them and, in the meantime, explore different ways to resolve your back taxes as quickly and cheaply as possible.
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Know Your Options
It’s always best to pay the tax in full as soon as possible because you avoid adverse actions such as a lien or even a levy. The IRS may have you thinking that’s the only way to pay off your debt, but luckily, it’s not. So take some time to research your options and eventually choose the one that suits you best.
So if the full debt repayment is off, another option is to set a payment plan. It means that you agree with the IRS on monthly, more manageable amounts that will go towards paying off the tax debt. When you decide on the option, make sure to make an official agreement where that amount will be specified. Just keep in mind that interest and fees will accrue on the remaining amount until you pay it in full.
You can also get expert help to review your debt and all costs related to it. The IRS adds various fees to the back taxes that aren’t always justified, so you have the possibility to make them waive some of these costs. Eventually, that can cut the amount of your debt.
Another option is making an Offer in Compromise, also known as tax settlement. With this arrangement, you agree to pay the IRS less than you owe. For this to be possible, you need to prove that you really can’t pay the entire amount or that it will put you in financial hardship.
On the following website, find out what happens to your debt if you file for bankruptcy:
https://www.debt.org/bankruptcy/does-bankruptcy-clear-tax-debt/
Pay the Oldest Debts First
When you’re in an unenviable financial situation, debts can pile up fast. If you add back taxes to all that, it’s clear that things aren’t great. But you should try solving these problems one by one. The back tax should be the first on this list because the IRS has priority over all other creditors. It means that, in case they make a lien on your unpaid taxes, they can seize your funds for debt collection.
One of the ways to pay off back taxes and avoid a lien is a personal loan. It’s usually an unsecured arrangement you make with lenders (banks, credit unions, or lending companies), and you repay the borrowed money within the agreed period. The loan terms will depend on your creditworthiness and current finances. Make sure to apply for a loan before the IRS files a lien against you because it can affect your credit ability.
Get Legal Help
Don’t wait for the IRS issue to become nasty, but react at the first sight of a problem. Having an experienced Raleigh tax attorney by your side can help you handle many taxation issues and save you a lot of time and money. Also, they will act on your behalf in front of the IRS, so you’ll be spared of frustrating and sometimes unpleasant calls.
File Tax Return
Do an audit of all tax returns files for years that haven’t been paid, even if you have arrears. Any missing returns carry high penalties, so you should file them anyway to avoid unnecessary costs. If the IRS does that for you based on the received information about your income, that amount will in most cases be overstated.
Soon after, the IRS will start debt collection, and you may be in trouble. So always fill in your tax return, even if you know you can’t pay it. You’ll need these forms to negotiate payment plans or tax settlements with the IRS. Without your returns, that wouldn’t be possible.
Don’t Deny the Problem
Regardless of the amount you owe the IRS, the most important thing is not to deny this debt. Sure, it’s not pleasant when collectors call you and ask the same questions about when you will pay your back tax. But you have to understand that on the other side are also people who just do their job. And they also pay taxes on their income and probably encounter cases like yours every day.
So don’t hesitate to return a call to the IRS. On this web page, get to know how this conversation could look like. Be polite and present your problem to the agent. It’s not out of place to say a few kind words and try to “soften” the situation. It will please both you and them, and you will likely have more chances, for example, to delay any collection activity if you’re only kind and honest.
Tax problems can be burdensome, but they are solvable. There are various strategies to help you settle your debt and avoid adverse actions. Also, if necessary, don’t hesitate to seek legal help for your IRS situation.
