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Tax is one of those hushed topics that we do not usually tend to talk about, and that is probably why so many people end up having tax debt that they do not know how to get rid of. In 2014, 18 million people owed tax to the government, as per the IRS data. The report also showed that 10 million people face penalties due to delay in tax arrears every year.
These figures are enough to prove that we have a problem – people are accumulating tax debt along with other kinds of debt, and it is affecting their financial stability. That is why we offer many debt relief programs Texas to make sure that you have professional insight into how you can fix this problem.
Over the years, the problem of tax debt has only gotten bigger. In 2020, Americans owed nearly $527 billion in debt, which is a huge figure. To make matters worse, the IRS expects the number of delinquent taxpayers to grow in the future due to the rise of the gig economy and freelancing.
Now, there should be no debate on how much tax debt you have – your aim should be to resolve it as soon as possible. The more you accumulate, the bigger the problem gets.
So, what exactly is tax debt? When you do not pay the full tax balance on the federal income tax return by the deadline, you accumulate tax debt. With time, the debt keeps increasing until you pay it off completely.
The IRS will charge interest and penalties on the tax, and that will also keep adding unless you pay the tax debt. At the same time, the IRS will also send you reminders to pay your debt. If you don’t respond to these reminders, there will be dire consequences, such as levying on bank accounts and wage garnishment.
Potential Consequences of Tax Debt
Experts often compare tax debt to credit card and student loan debt. However, we do not focus too much on comparing since our goal is to make sure people have to tax debt on their accounts.
If you do not resolve your tax debt as soon as possible, you will be in hot waters. First off, you will get a ton of notices from the IRS reminding you that you have to pay your debt. In case you ignore those notices, the IRS will put you in an automated collection. It basically means that your wages will be garnished. You certainly do not want that to happen.
You thought that was it? No, it is not. The IRS has even more drastic measures in place to make sure that people pay their taxes on time every year. If you default on your taxes, the IRS might seize your assets.
The final straw is your international travel getting banned. As you can see, the repercussions of tax debt are quite concerning and the more you ignore the problem, the worse the results get.
On top of that, you will be charged with penalties and have to pay interest on tax. At the same time, it will become a nuisance for you to keep in touch with a private debt collector or a revenue officer since they will not leave you in peace.
Therefore, it is important that you avoid all of these problems in the first place so that you do not have to be uncomfortable later.
What if You Cannot Pay Your Taxes?
If you cannot pay your taxes due to a financial emergency or any other reason, the IRS has certain lenient measures in place to make the process easier for you.
The possible solutions for you depend on your particular circumstances. Here are some options available to you:
While different options are available, it is not child’s play to get a solution for yourself. Instead, you would have to get in touch with a tax professional, and they will set up the agreement with the IRS.
Bear in mind that ignoring the issue is the worst mistake you can make. If you do not have a settlement or arrangement with the IRS, they will somehow make sure you pay, either by garnishing your wages or levying your bank account.
How to Handle Your Tax Debt?
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As we have already discussed, you should not ignore your tax debt. Instead, you should try to solve the problem. We make sure we find the right solution for you so that you do not have to worry about the IRS being on your case or garnishing your wages.
Before you look for solutions, make sure that you actually owe what the IRS is saying you do. Review your tax returns and for the past three years. Doing so will show you if your balance is correct. If not, you can amend your returns.
Here are three ways to handle your tax debt:
File Your Taxes
Yes, you might not be able to pay your taxes, but make sure you file them nevertheless. If you ignore your taxes altogether, that will worsen the problem. So, make sure you are filing your taxes.
Not filing your taxes will put you in criminal trouble, and you do not want that to happen. For one, if you do not file your taxes by the deadline, you may end up facing a monthly 5% penalty of unpaid taxes. The penalty can go up to 25% at maximum, increasing your tax debt substantially.
If you need more time to file your taxes, make sure you apply for an extension instead of just ignoring the taxes that need to be filed. Pay as much tax as possible by the deadline, as it will allow you to avoid penalties and interest.
Make a Payment Plan
If you are unable to pay the taxes in 120 days the IRS has provided, there are some other options too. One of them is requesting a payment plan.
A long-term payment plan will be the best option for you if you think you need more than four months to resolve your balance. However, keep in mind that you can only qualify for these plans if you owe the IRS less than $50,000.
Also, they can incur penalties and interests, so you should be wary of that too.
You can also delay payment on your tax debt if you are able to provide evidence for the fact that you will be unable to meet your daily expenses if you pay off the tax debt.
However, you cannot delay your payment for much longer as the IRS will ask you for payment one day. Also, your tax debt will keep accruing penalties and interest, increasing the total amount you have to pay.
One of the debt relief programs Texas that you can get from the IRS is a settlement. In this option of debt resolution, you pay less to the IRS than you originally owed them. For this, you have to prove that if you spend money on paying off the taxes, you will face economic hardship.
When opting for this option, you need to be very realistic because the IRS does not forgive tax debts easily. It is in very rare situations that they might make an exception.
For instance, if you are undergoing true financial hardships or have experienced a catastrophic medical expense that has disturbed your budgeting.
Let Us Help
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If you owe the IRS less than $10,000, you might be able to solve the problem yourself. However, if you owe more than that, it is best if you have a professional by your side. Our team will make sure you get better terms from the IRS and end up in better financial standing than you currently are in.
Taxpayers are often lured by fraudulent companies who claim they will make your penalties or interest go away. If you ever hear someone say this, know that something fishy is going on.
As for us, we only make claims that we can deliver. Our team of professional debt relief agents will help find the best solution to your problem, ultimately giving you immense peace of mind and more financial stability.
More importantly, when you leave this task to us, you do not have to do the research yourself, as we take over the job. You just have to share the documents we require, and we will take care of the rest.
Call us today to talk to a representative about your tax debt relief Texas services.