25 Apr Understanding Tax Debt and How to Solve It
Tax Debt Problems While tax season is frustrating and stressful for everyone, it can be particularly panic-inducing for those in tax debt. Tax debt means that you owe taxes after the Internal Revenue Service’s filing deadline. This can create multiple problems between you and the Internal Revenue Service or IRS. Sadly, just because you’re in tax debt doesn’t mean you’ll be left alone. The IRS has several mechanisms they can use to get the taxes you owe.
IRS Problems Some problems with the Internal Revenue Service could include a tax lien, levy, wage garnishment as well as penalties such as interest accruing on your tax debt. A tax lien is according to the Internal Revenue Service, “ the government’s legal claim against your property when you neglect or fail to pay a tax debt.” This can affect you by decreasing your ability to get credit and can also lead to a tax levy. A tax levy involves the possible seizure of any of your assets be it your house, car or even the money in your bank account. This is the most extreme mechanism the IRS can use and one they don’t use without warning. It’s important to keep in mind that it is always better to file a tax return even if you know that you will go into tax debt rather than not filing one at all or cheating on one. You can’t go to jail for not being able to pay the taxes you owe, but you can go to jail for cheating on your taxes. Now, let’s talk about some possible solutions.
IRS Debt Forgiveness According to the Internal Revenue Service, “ there are several exceptions to the taxability of canceled debt, such as insolvency or bankruptcy.” If paying back your tax while most likely cause you to go into financial crisis you may be able to qualify for IRS Debt Forgiveness. Many specialized companies exist to help you get rid of national tax debt. These companies can negotiate settlements between you and the Internal Revenue Service.
Tax Relief If you qualify, tax relief can reduce the amount of taxes you owe either by a percentage or dollar amount. Typically, programs like these are set up for victims of natural disasters such as hurricanes. Tax relief programs can sometimes be applied towards energy efficient appliances, power generation or windows. There have been certain tax relief programs for victims of terrorist attacks as well as for victims of Hurricanes Katrina, Rita, and Wilma. Many of these programs vary and depend on specific circumstances to qualify.