Year after year Americans file their tax return, only to realize that they owe much more than they can afford to pay. If this situation sounds familiar, you are not alone. In fact, it happens every day. Many people lose their financial footing simply because they do not have the proper tools or knowledge to settle back tax debt.
Settling your tax debt is an important first step to regaining control of your financial freedom and ensuring the safety of your assets. It is always best to seek a tax relief professional to help with IRS and State tax debt resolutions. Below are some actions you can take to resolve your tax debt . . .
Uncovering Ways to Pay
Finding a way to pay your taxes is the first and most obvious solution. Borrowing money from a bank may be a painless way to pay your taxes and avoid nasty IRS penalties. If your circumstances do not allow you to secure a loan, borrowing from a family member, friend, employer or even your church may be an option.
Putting your tax bill on your credit card is another possible means to an end. Unfortunately, if you don’t pay off the balance on your card, you may pay more in credit card interest than you would have just paying traditional IRS installments.
Be Punctual and File on Time
Even if you cannot afford to pay your taxes, always file your tax return when it is due. The penalties for filing your taxes late can result in upwards of 25 percent of the amount of the taxes previously due.
Filing and paying late can definitely be pricey, but if you don’t pay anything, the IRS will discipline you-going as far as placing a levy on all bank accounts on which you are a signer or co-signer, garnishing your wages, and placing liens on your property and assets.
File an Extension
There is a way to delay your tax-filing due date until October 15th. File IRS Form 4868 before April 15 to qualify for this extension. Keep in mind, this action does not postpone the deadline for paying your taxes, but the penalty for late payments does not take effect until the six-month extension ends if you pay 90 percent of your tax liability before April 15th, and pay the remaining balance when you finally file your tax return.
IRS Payment Plans
If you are looking for a payment schedule, the IRS has a few choices. Short Term Extensions push your tax due date out 120 days, allowing you more time to pay. Monthly installments are for those who cannot pay in full after the 120-day buffer. Those who chose to pay installments must be aware that the IRS will charge fees and interest.
Ultimately, if the IRS decides you are unable to pay your tax debt, they may decide to postpone collection until your financial situation recovers. Communication is key.
IRS Offer In Compromise as a Last Resort
If you are in serious financial crisis, the IRS may consider an Offer In Compromise (OIC). Offer In Compromise is a consensus between the IRS and the taxpayer, where the taxpayer resolves the tax liability for less than the total amount owed. The smaller tax-debt sum permitted to be paid must be equivalent to what the IRS is convinced it can reasonably earn from the sale of your assets, such as property, cars, possessions, and holdings. If you are interested in asking for an OIC, you must send a completed Form 656, and pay the application fee.
If this seems overwhelming or if you have questions, contact a tax debt relief attorney at US Tax Shield today to learn more about paying back taxes.