Have you been wondering how to deal with your IRS debt? You’re not alone—many people have found themselves in the same situation. But there’s a solution that can help. Getting rid of an IRS tax lien or a past-due tax bill is now easier than ever, thanks to the IRS Debt Solution programs. This program allows taxpayers who owe back taxes and penalties to pay them off over time while avoiding additional penalties, interest charges, and more serious consequences like losing your driver’s license or having your wages garnished by the government.
Read the article to learn more about how it can help you get on track with your tax obligations!
What are IRS penalties?
If you have unpaid taxes, you may be subject to penalties that can increase your tax debt. Penalties are assessed on top of your tax debt and can result in additional interest and taxes. If you owe $10,000 in taxes, but the IRS considers a 10% violation penalty, your total tax bill will be $11,000 instead of $10,000.
You can avoid paying penalties by filing your taxes on time or correctly. The IRS offers many tools and resources to assist taxpayers who want help filing their returns electronically or by mail. There are already numerous software programs that make it easy for taxpayers who need assistance navigating the complex world of international taxation while also providing support when they run into roadblocks along the way!
How Do the IRS Impose Interest?
The IRS interest rate is set by law, ranging from 3% to 6%. This means that if you have $10,000 in tax debt and an average monthly balance of $1,000 during the year, you will owe approximately $600 in interest.
- It is compounded daily.
The IRS compound daily, so they charge you interest on all unpaid balances simultaneously each day. There may still be an outstanding amount due to the interest even if the initial debt is already paid in full.
- The interest rate does not affect the total amount of tax you pay.
The only way the interest rates affect your taxes is by changing the total amount you owe over time.
If the interest rate changes, then the total amount owed will change.
Tax Levy and Wage Garnishment
There are many situations where the IRS may levy your bank account, seize property, or garnish your wages. Here’s what you need to know about tax levies and wage garnishment.
A tax levy is the legal seizure of property or income to satisfy a tax debt. The IRS can take any amount in your possession as long as it is enough to cover your balance due on your taxes and fees. This may include checking or savings accounts, retirement accounts, real estate (such as your home), vehicles, and other personal property.
Wage garnishment is a process in which the Internal Revenue Service (IRS) seizes your wages to collect on back taxes owed.
You’ll have to be issued an IRS tax notice. If that happens, you’ll need to send in response within 30 days confirming whether or not you agree with the amount of taxes being claimed.
Tax Debt Solutions for Every Taxpayer
IRS Representation
IRS representation can be a great option if you’re unsure what to tax debt relief arrangement is for you. You’ll have a professional who knows the ins and outs of your case while you handle other responsibilities in your life.
If you hire an attorney, they will first meet with you to discuss your situation, identify potential issues and work together as a team to resolve them. The chosen tax debt relief agency can also tailor the perfect reduction program according to your situation.
Once that process is complete, they will file all necessary forms with the IRS and provide updates on their progress throughout the process.
IRS Appeals
If you’re unsatisfied with the results of an IRS audit, you have the right to appeal. That’s because when the IRS audits your taxes, they are supposed to ensure they are fair and accurate. If they don’t do that, there’s something wrong with their process that needs to be fixed.
When you file an appeal, the IRS will send someone over to look at what happened during the audit and decide whether or not they should adjust their findings based on new information. Sometimes people win on appeal; sometimes people lose; sometimes it’s a mixed bag where some terms are modified. If you win on your appeal, all is forgiven—you won’t owe any more money or get hit with interest charges—but if you lose, expect another letter from them soon demanding payment for everything again!
Offer in Compromise
An Offer in Compromise (OIC) is a tax debt relief program that allows taxpayers to settle their tax debts for less than what they owe. If your offer is accepted, you’ll be able to pay off your debt through monthly payments.
An OIC is not the same as an installment agreement or payment plan—it’s one of the only ways to settle large tax debts without litigation. The IRS will consider an offer if you’ve been unable to make payments on time due to having low income, high expenses, or bad credit history (or any combination thereof). They’ll also look at your assets and liabilities when determining whether or not they think it’s worth accepting an offer.
The best way to determine if this solution is right for you depends on how much money you owe in back taxes and how long it takes them to process applications.
Installment Agreements
An installment agreement is a great solution to pay off your tax debt in small, manageable payments. If you’re eligible, it can help you avoid stiff penalties and interest charges that would otherwise make your outstanding balance even bigger.
You’ll make monthly payments to the IRS, starting with the amount of your past-due balance due at the start of each month, until your total tax bill is paid in full. The amount of each payment will vary depending on your income and expenses.
Penalty Abatement
Penalty abatement is a process for reducing interest and penalties on your tax bill. You can request a penalty abatement from the IRS, but it’s important to note that this is not the same thing as asking for a reduction in the amount of tax you owe.
Penalty abatement allows taxpayers who failed to pay their taxes by the due date (or on time) to have any penalties removed or waived if they have a good reason for not paying on time. The IRS defines “good reason” as an event beyond your control, such as loss of wages due to injury or illness, natural disaster damage, or death in the family.
There are many ways to reduce your tax debt if you can’t pay it all at once.
If you’re amid an unexpected financial problem, whether owing back tax or struggling to make ends meet after a layoff, the IRS has options to help you out. The agency can help you choose the best way to get your finances back on track without prematurely declaring bankruptcy.
The IRS will help you understand your options and choose which one would work best for your situation by reviewing:
- Your income and expenses
- The amount of taxes owed
- Your history of paying taxes on time
The bottom line is that if you have a tax problem, it’s important to understand all your options. The IRS is not going away anytime soon and must be dealt with. The sooner you contact them, the better off you will be in the long run. When dealing with our nation’s tax agency, you can take many different routes, so don’t wait until it’s too late!
Contact us to learn more about tax debt relief programs for you!
