Are You Unable To Resolve Your Tax Debt?
Very few things in life are as stressful as owing the IRS money, especially if you do not have the funds to pay what you owe. “So what should I do?” You are probably wondering. Well, this should not be a complicated issue if you can get the services of a proficient tax defense attorney. Since what you do at this juncture will matter a lot, it is important that you do the right thing to avoid legal trouble. Here are a couple of things to keep in mind if you are unable to resolve your debt.
1. Failing To File Returns
The first and most tempting mistake that most people make when they realize they are unable to pay their taxes is not filing returns at all. While this seems like a good idea, it will lead to more penalties. The IRS automatically places a 5% penalty each month up to 25% if you do not file your taxes. Furthermore, you will also be expected to pay interest on the total bill until it is paid in full.
2. Not Requesting An Extension
An extension will give you up to 6 months to get your finances sorted before you have to complete your taxes. All those who file before April do not have to worry about the penalty imposed when you fail to file. You will only have to pay a 0.5% penalty for failure to pay but the penalty is also capped at 25%.
What You Should Do
Are you unable to clear your tax debt in the first 120 days? Worry not! The IRS has a couple of options that can help you manage your owed balance. Here is what you can do about it.
Ask For A Payment Plan
You can request for an installment agreement, which is essentially a long-term payment plan. This can be a great option if you can’t pay your balance in the required 120 days. It is, however, worth noting that using these plans can add interest or even penalties to your original debt When it comes to installment agreements, there are four different types: guaranteed, streamlined, partial-payment, and non-streamlined. Deciding which installment agreement is right for you will depend on a few factors, but mainly on how much you owe. But more on that in a later blog.
Can you prove that paying the debt will make it impossible for you to afford your living expenses? One option is to delay payment for a while until you are able to pay. The problem is that the IRS eventually comes calling and you will have to pay. Another option is to settle for less than you owe. You can get an ‘offer I compromise’ plan if you can prove that paying the IRS will create financial hardships for you.
Get Professional Help
Managing tax debt is a tricky affair that can easily escalate to getting fines or criminal prosecution. It is best to get in touch with a tax attorney who will ensure that you are handling the situation.
Have a question on tax debt? Contact Venar Ayar.