Are You in Trouble With the IRS? Here’s How to Get Out
In 2009, 8.2 million people were behind in their taxes, owing a total of $83 billion. The situation is no better today. People fail to honor their tax obligations for various reasons. You might have been too busy with work and kept procrastinating, you may have lost your job, or you may have faced […]
In 2009, 8.2 million people were behind in their taxes, owing a total of $83 billion. The situation is no better today.
People fail to honor their tax obligations for various reasons. You might have been too busy with work and kept procrastinating, you may have lost your job, or you may have faced an illness or a major life event that threw you off course. Whatever the reason, you must know that non-compliance can put you in trouble.
If you think you might be in trouble, do not fret. The following are things you can do to save your soul.
1. File Your Taxes
You may have missed the filing deadline, but that does not mean that it’s the end of the world. What many people do not know is that it is better to file late than not to file at all. Yes, you will pay the penalty for lateness, but it’s usually just 5% of what you owe for each month that you are late.
But what if you don’t have the money? It is still no excuse for not filing. The best thing to do is to file even without paying. Again, you will be slapped with a fine, but it is better to be fined for not paying but not for both.
Filing will also help you determine how bad the situation is. This will allow you to plan the next cause of action.
2. Paying Something Is Better Than Not Paying at All
If you owe a significant amount in taxes, you may feel like you are in a rut. Many people feel helpless and do not see the need to make an attempt to pay because “it will be a drop in the ocean”. However, something is always better than nothing.
The IRS is accommodating and can allow you to pay over time. If you owe less than $ 50,000, you can even make an application online without even having to negotiate with anyone over the phone. You can also send an installment agreement form through the mail.
However, before making the application, make sure that you have filed all of your taxes.
3. Consult a Professional
The truth is that dealing with the IRS is not everybody’s cup of tea. And for good reason; dealing with them is stressful and time-consuming. And they don’t bend easily.
If you owe more than $10,000, it is better to seek the help of a tax expert to help you engage with the IRS. Experienced tax professionals can negotiate on your behalf to ensure that you pay the lowest amount allowable by law.
They can also negotiate to have you pay your tax debt in manageable installments. To top it up, they can handle all the communication and attend face to face meetings on your behalf.
4. Ask for Forgiveness
It is not common for the taxman to forgive taxes, but the IRS has a compassionate side.
If you are going through an extremely rough patch in your life, you may be allowed to settle an amount that is less than what you owe.
However, you must be able to prove that you are struggling with tax burden. Be informed that there is no guarantee that you will be granted a compromise, but if you have lost your job, have incurred extremely high healthcare costs, you may have a chance.
All you have to do is to fill in Form 656 to make an application for an Offer in Compromise.
5. Lookout for Amnesty Programs
Once in a while, there might be amnesty programs depending on where you live.
An amnesty is a program where the state allows individuals or businesses to pay outstanding debts or file late tax returns without penalties. However, to take advantage of an amnesty, you must pay the outstanding amount during the amnesty period.
Unfortunately, you cannot bank on amnesties because they are not permanent or even available in all places. Currently, it is only Indiana, Tennessee, Connecticut, and Texas that have active amnesty programs.
You Must Face It
The biggest mistake you can make is to hide your head in the sand. You cannot resolve your tax issues by wishing them away. As such, do not make the mistake of ignoring mail from the IRS or decide to “wait for your fate”. The earlier you take action, the better. After all, it may not be as bad as you might think.