Steps On Resolving Your Piling Tax Debt With the IRS
The thing about this, though, is that you need to file your taxes even if you know you can't pay. If not, the consequences can be more than you can handle.Luckily, there are a few guidelines you can follow to make sure everything goes smoothly.
OK, let's be honest here: nobody wants to deal with the , but have you ever wondered what will happen to you if you don't pay your taxes by April 17?
The answer is simple: They will start hunting you down.
No kidding. That's why you see ads and commercials everywhere reminding you to pay your taxes . Even your nosy next-door neighbor would remind you about the deadline! The thing about this, though, is that you need to file your taxes even if you know you can't pay. If not, the consequences can be more than you can handle.
Luckily, there are a few guidelines you can follow to make sure everything goes smoothly.
It's normal to avoid things. Even if you're the most responsible person in the world, there are times when we feel like procrastinating. From getting an oil change to clearing the dishes in the sink, we always try to find excuses, and tax debt is no different
Unfortunately, there's no way you can avoid tax debt. Even if you did, eventually you'll start getting notices from the IRS warning you of the consequences. Worst-case scenario: your properties and assets will be at risk of being forfeited.
2] Always File Your Taxes, Even If You Can't Pay
If you don't file by the deadline, there is a possibility of you getting a 5% monthly penalty on your unpaid taxes. This is why you should file, even if you know you don't have the money.
If you can't afford to pay off your taxes, there are a few things you can do; one such way is to file for an extension. You should only request for an extension when you are certain that you do need more time, however. So, if you want to avoid the penalties and interest, you better start preparing to file your annual taxes every April.
3] Seek Payment Options From the IRS
There's a reason why the IRS offers payment options: they want you to pay your tax debt. It doesn't matter how long it's been, you obviously still need to make your payment. Remember: the IRS never forgets.
If you can't pay your taxes in full within 120 days, you can either request a payment plan, delay it, or you can just settle for less. The IRS will always be willing to work with you, but you need to make sure you communicate with them. There are a few stipulations you need to be aware of, however.
4] Requesting an Installment Agreement
This is a long-term payment plan. This is best if you know you can pay in full, but you need more than just 120 days to resolve your tax debt issue.
However, you have to be aware that this payment plan is only available if you owe the IRS less than $50,000, including interest and penalties. Make sure you speak to a professional, so they can discuss your best options.
This option is only available if you can prove to the IRS that you could barely put food on the table. That's not even a joke; the IRS is very particular about giving options to taxpayers. If you want to delay your plan, you better have proof showing them that paying your tax debt will prevent you from affording even the basic expenses.
Remember that just because they let you delay it, doesn't mean that you can procrastinate. Make plans on how you can settle, because eventually, even a delayed payment will accumulate penalties and interest.
6] Settle for Less Than the Amount You Owe
The IRS is very determined in making sure taxpayers pay their debts. This is why you can try the IRS offer in compromise option, where you only pay a portion of what you owe but in one lump sum.
Before you dive deep into this option, though, it's always best to consult a tax attorney to make sure you qualify for this as there are strict requirements. This is because the offer in compromise needs a lot of documents that prove you're qualified through your financial hardship situation.
7] Find an Expert Who Can Assist You
Crunching numbers and dealing with lots of documents can be a tricky situation already and when you add the IRS into the mix, you just have a more complicated matter. Never try to settle your tax issues without consulting a certified financial planner or a public accountant first. This is especially true for those who have their own businesses.
Usually, after missing your deadline, in the first three months, you will start receiving notices. Then, about two to six months later, the tax lien will happen, meaning that the government takes claim of part of your property. By this time, if you're still not talking to a financial advisor, you are literally digging your own grave.
This is why getting a consultation from a reputable tax attorney is very important. Finding a credible tax professional can help you prepare and deal with the IRS from day one.
8] Keep Bad Things from Happening
By the time you reach to the point of the IRS putting a tax levy on you, you know you're doomed. That is an act of seizing all of your assets including bank accounts, Social Security payment, property, and even your paycheck.
So how can you keep the bad things from happening? The most obvious answer is simple: always pay on time. Even if you messed up the previous years, try to make sure you are well-prepared for the next one.
The best way to do this is to have enough of your paycheck withheld for taxes. This way, you can expect your tax bill to be covered properly.
Also, don't procrastinate-nothing good comes out of procrastination. Above all else, though, don't ever try to avoid the IRS. When we said they will hunt you down, we mean that they will do everything in your power to get their money back, but they are always willing to work with you. You just have to work with them.