In 2021, the average American taxpayer paid down more than $20,000 in federal tax debt. That is a significant debt to have! However, if you’re reading this, I’m going to assume you already know. It’s likely that you already feel stressed out and overburdened by your debt. The good news is that you can eliminate your tax obligation without having to declare bankruptcy or irreparably destroy your life.
Numerous tax debt reduction solutions can help you lower your entire balance while making repayments more manageable and reasonable for you.
Let’s first talk about why you should seek a tax resolution.
1. Unmanageable Tax Debt
There is no shame in asking for assistance if you owe taxes but are unable to pay them. You won’t be penalized by the IRS for asking, and they frequently cooperate with those who are having financial difficulties. They are conscious of the fact that unforeseen costs can arise in life.
If you have fallen behind on payments or have been contacted by the IRS due to an unpaid tax bill, you must communicate with them right away to learn about your options for settling your debt and avoiding additional legal action. Additionally, you can speak with certified tax professionals to examine your situation so they can offer you options and directions on what to do.
2. Your Payments are Past Due
You might want to do something if you’re falling behind on your payments. To help with tax collection, the IRS has the authority to seize wages, bank accounts, and other assets. If you and your company cannot pay the IRS the full sum owed, a lien will be put on all of your assets. Federal law mandates them to sell your property at auction to recuperate what they claim is owed if you ignore a notice of tax lien.
For those who owe back taxes to the Internal Revenue Service, either individually or via their businesses, there is an alternative called a tax debt relief plan (IRS). The IRS also provides additional tax relief programs, such as the following, in addition to assisting taxpayers in getting out of debt by allowing them to pay off their outstanding sums gradually rather than all at once as part of an Offer-in-Compromise (OIC) payment arrangement.
- Installment Agreement Plan
Through a series of payments made over time, consumers can repay debts under an installment agreement. This can be helpful for those who want to put off their payments because they are experiencing problems making ends meet or who require additional time to settle their debt.
- Penalty Reduction
This IRS strategy refers to the method through which you might have your tax penalty decreased or eliminated. If you can show that the failure to pay was brought on by a reason that was considered a reasonable one by the relevant agency, the IRS will allow you to file for penalty abatement.
This signifies that the IRS will take into account any events outside of your control, like:
- The death, serious illness, or incapacity to make payments due to the taxpayer’s or taxpayer’s immediate family’s health condition
- Civil strife or natural disasters
- Impossibility of obtaining records or documentation
3. Missed Years of Filing Tax Returns
While ignoring your tax obligation is not a good option, if you have already filed returns and are currently behind on payments, your situation is likely to get worse. The IRS will automatically consider your failure to file as suspicious; chances are excellent that they have been keeping an eye on you. You must be aware of the repercussions of failing to file taxes since, in some cases, the interest and penalties payable on a tax liability may exceed the amount you initially owed.
The IRS will issue you two notices if you haven’t filed any returns in years: one when it’s time to file and another when the deadline has passed. If you don’t have a good cause, the IRS will charge you a failure-to-file penalty in addition to their initial demand. These fines can range from $100 per day to $25,000 per day, depending on how long ago they were overdue, as well as other elements like income level and other variables.
Because you haven’t filed your taxes in years, you should also be concerned that interest charges may be made.
In the worst-case scenario, they might use this as justification to look into whether there was any criminal behavior associated with failing to submit taxes when it comes to an audit or another situation when they require more information from you.
4. Your Wages and Bank Accounts are Being Seized by the IRS
When money is taken out of your paycheck and sent to your creditors, it is known as wage garnishment. It is intended to support the repayment of your debt. A bank garnishment, on the other hand, takes place when a bank administrator with the necessary power requests that money be taken from your bank account(s) in order to pay off your debts.
In general, wage garnishments are relatively more frequent than bank levies because they are simpler for collectors to implement than other measures of collecting debt payments, such as through asset seizures or repossessions, which demand additional court rulings or procedures for them to proceed.
5. You’ve Received Too Many IRS Communications
Dealing with the IRS may be incredibly uncomfortable due to its tendency to be highly aggressive. When it comes to the collection, this is especially true. In the event that you don’t contact the agency right away, they will use their considerable influence against you.
In addition, the IRS might be complicated to understand because there are quite numerous ways to file taxes. Most people aren’t aware of all their options or what data they need from other sources, such as banks, and employers, in order to properly file their taxes. If you’re not careful, problems can happen quickly.
The last issue with dealing with IRS contact is that it may be extremely overwhelming; with letters from collection services, judicial court orders, and bills from creditors pursuing legal action, there doesn’t seem to be a conclusion in sight!
After going over each of the primary motivations for receiving tax relief, let’s talk about how to choose the top tax debt relief company:
- Examine their credentials and certificates that are connected to their employment in this industry. It’s an excellent sign that they’ll be able to assist you too if they have that expertise because it shows that industry professionals have acknowledged them as being competent in their sector.
- Browse the testimonials. To find out what other people have said about the business or person, check out review websites like Yelp or Google. This could give you a feel of how they approach problems and whether they can help you with whatever circumstance you’re facing.
- If at all possible, review their performance history. If a company has been around for a while and has a solid track record, they probably have many satisfied clients who have successfully settled tax debts.
In conclusion, debt relief is a crucial choice for heavily indebted people. It can set you on the road to financial freedom and assist you in escaping the burden of your debts. Think about speaking with a professional for advice on the best course of action if you’re having trouble managing your debt or if it’s getting out of control.