There are a number of serious tax problems facing many Americans today, all stemming from unpaid debts owed to the IRS.
If you have significant tax debt and you’ve ignored the problem, or simply don’t have the money to resolve it, then you are putting yourself at risk.
The IRS uses a variety of increasingly aggressive methods to penalize you and collect the money they claim you owe, including:
- Taking up to 80% of your work paychecks until your debt is repaid.
- Hitting you with additional penalties that can sometimes amount to up to 25% of the total amount owed.
- Charging you interest on the amount you owe, so that your debt increases every day that you don’t pay.
- Filing a federal tax lien against you, effectively stopping you from being able to obtain financing of any kind.
- Levying your bank accounts to take funds directly from your checking, savings or even your retirement accounts.
- Fining you up to $10,000 (in addition to other penalties) for more serious actions, such as tax evasion or a business’s failure to pay taxes withheld from employees’ paychecks.
No matter what steps have already been taken against you – whether you’ve just received the first notice, or the collection attempts have already begun – if you don’t take action now, your tax problems will only get worse.
Below, we’ll cover each of these common tax problems in greater detail, along with the potential solutions that can be achieved by using a qualified tax professional.
6 Tax Problems & Solutions
Inability to Pay Your Tax Debt
One of the most common tax problems is simply being unable to pay the taxes that you owe to the IRS. This is a stressful and frustrating situation to be in, and unfortunately it can result in a number of additional problems that will hurt your finances even further.
Solution: Offer in Compromise. This is a program for those who cannot afford to pay their tax debt in full. With the help of a skilled tax professional to negotiate on your behalf, you may be able to settle your debt for considerably less than what you owe.
Penalties & Interest
From the moment you miss your first tax deadline, you’ll likely start incurring penalties and interest from the IRS. So, if your back taxes have gone unpaid for years, then you’ve likely amassed a much larger tax debt already. And the longer you wait to pay it off, the larger that debt will become.
Solution: Penalty abatement. An experienced tax professional may be able to reduce your penalties, potentially reducing your total debt considerably. Your attorney will take the necessary steps to prove that you meet at least one of the three requirements to qualify for abatement: reasonable cause, administrative waivers, or a mistake by the IRS.
A wage garnishment allows the IRS to collect money from you without you paying them directly. The IRS will instead contact your employer, who will be obligated by law to deduct funds from your wages (up to 80% per paycheck) to pay off your debt.
Solution: Wage garnishment release A tax lawyer can put a hold on the status of the garnishment, and will negotiate with the IRS on your behalf to determine the best settlement for your financial situation.
Liens and Levies
A federal tax lien and account levies are additional aggressive actions the IRS will take to penalize you and collect the money you owe without you paying the IRS directly. The tax lien will appear on your credit report, making it nearly impossible for you to obtain a loan for any purpose. Account levies will enable the IRS to take money directly from your financial accounts, including checking, savings or retirement accounts.
Solution: Lien/Levy Release. With professional representation, you may be able to release the federal tax lien or other levies. Depending on your situation, your tax professional will work to reverse these IRS actions so that you can address your tax debt problems.
Delinquent Payroll Taxes
If you are a business stakeholder who has failed to pay taxes you have withheld from employees’ paychecks, then you may be subject to stiff fines and potentially other charges. The IRS has the right to go after company assets, as well as the business’s owners and officers.
Solution: Payroll tax representation. An experienced tax professional is essential in this case, as you will need professional representation to negotiate with the IRS and come to an agreement that protects you, your business and your assets.
State Tax Problems
Individual states are often even more forceful than the IRS in their collection efforts, and they typically act more quickly too. State tax problems are separate from IRS obligations and will need to be addressed on their own.
Solution: State tax disputes & settlement negotiations. Be sure to work with an attorney who has successfully represented other taxpayers in connection with their state tax problems and can provide a variety of solutions, such as a state tax audit, settlement negotiation, mediation hearings or payment plans.