Income Tax Debt Relief ServicesDealing with unpaid taxes can be a stressful and time-consuming experience, and it can be distressing to receive an IRS notice of deficiency . In this post, we’ll discuss tax debt relief programs, payment plans, and more.
- What is the IRS Tax Relief Process
- What are the Consequences of Not Filing a Tax Return?
- What are the Penalties for Unpaid Taxes?
- Can I Settle My Debt for Less?
- Does the IRS Offer Complete Income Tax Debt Forgiveness?
- What Happens if I Ignore the IRS?
What is the IRS Tax Relief ProcessThe IRS tax relief process is the process through which a taxpayer solves a tax debt issue with a solution from the IRS. Typically, the tax relief process looks something like this:
- Step 1: Identifying the issue
- Step 2: Investigating the cause
- Step 3: Identifying the solution
- Step 4: Building the case
- Step 5: Submitting the case
- Step 6: Tax relief
Income Tax Relief for Wage EmployeesThe IRS requires all individuals who earn income in the United States to pay taxes on that income. If a taxpayer is a wage employee, her employer will withhold federal income taxes from her paycheck and send them to the IRS on her behalf. If the employer withheld more taxes than what was needed to pay the actual balance, as is generally the case, the taxpayer will receive a refund when he or she files their return. When an employee incorrectly completes the form W-4 or claims too many exemptions, an employer may not withhold enough taxes to cover the balance owed according to the employee’s income tax return, resulting in a balance owed.
Personal Tax Relief for Self-Employed WorkersAll income is taxable, and being an independent contractor can actually make the tax filing process more convoluted. If you’re self-employed, you have a host of tax responsibilities to consider. Self-employed individuals are responsible for withholding their own federal income taxes; t hese individuals should pay their income taxes throughout the year by making estimated tax payments. Estimated tax payments are based on the prior year’s taxes owed and can be made monthly or quarterly. If the taxpayer does not make enough estimated payments during the year, they will accrue an estimated tax penalty and owe a balance when they files their income tax return. The individual will then need to seek the assistance of income tax debt relief services to assist them in finding a resolution plan.
What are the Consequences of Not Filing a Tax Return?It is always in your best interest to file a tax return on your taxable income, regardless of whether you can pay the amount owed or not. There are a wide range of consequences for taxpayers that file to file when they owe taxes, including a failure-to-file penalty, which can amount to 5 percent of your unpaid tax bill for every month the bill goes unpaid after the April deadline. You may also see losses carried over into the next year, along with a bevy of other detrimental consequences including a federal tax lien or levy. Although rare, unpaid taxes and unfiled returns could result in incarceration.
Don’t Lose Your Tax Return MoneyIf the government owes you money and you don’t file, you’ll lose your tax refund if you don’t file within 3 years of the April tax filing deadline date. After missing your filing deadline, the IRS will begin sending you reminders to file; if you ignore it, the IRS may file a substitute return, which may fail to grant you the credits and deductions you’ve qualified for.
What are the Penalties for Unpaid Taxes?Penalties add up the longer your debt remains unpaid. Your debt will accrue interest, typically half a percent of the amount owed. As time goes on, this can add up to a maximum of 25% interest on the amount owed. If a tax levy is issued and your debt remains unpaid, the penalty will increase to 1%. Many taxpayers find themselves paying thousands more than their original outstanding balance. Community Tax can help you avoid these penalties.
What is a Tax Levy?If you don’t settle your debt or come to an agreement with the IRS you may be subject to a tax levy, in which the government seizes your assets, including garnishing your wages and seizing your bank holdings. The IRS will send a series of letters before levying your assets, including a Notice of Intent to Levy.
Can I Settle My Debt for Less?With the help of a tax professional, it is possible to pay less than the total amount you owe. There are various ways that this can be accomplished, including the government’s Offer in Compromise program and declared uncollectible resolutions. You may also be excused from a first-time offense using IRS first time penalty abatement.
Offer in CompromiseThe Offer in Compromise or OIC program is an Internal Revenue Service feature that allows any qualified taxpayer with an unpaid tax debt to negotiate for a settlement that is less than the total outstanding balance. While rare, if approved, taxpayers may find the IRS will forgive debt in the hopes of receiving as much of the total bill as possible. In order for the IRS to approve an offer in compromise, the taxpayer must meet one of the three following conditions:
- Effective Tax Administration
- Doubt as to Collectability
- Doubt as to Liability
Currently Not CollectibleIf currently declared not collectible, your tax debt will be put on hold for a set period of time due to your hardship status. While your account is in this status the IRS will generally stop all collection activities, meaning your assets and income won’t be levied. However, your debt may still accrue interest and other failure to pay penalties and the IRS is still able to file a Notice of Federal Tax Lien, which can affect your credit rating negatively. Before you can file for a Currently Not Collectible (CNC) status, you’ll need to file any delinquent tax returns the IRS will also need a detailed look at your financial information, including:
- your income status
- current expenses
- and other debts you may have incurred, like student loan or mortgage debt.
Does the IRS Offer Complete Income Tax Debt Forgiveness?Complete debt forgiveness occurs in only the rarest of cases — the IRS will rarely cancel debt. While partial debt forgiveness from the internal revenue service is more common, you must meet a variety of qualifications in order to apply for this distinction. You must prove that you do not have the means to pay your tax debt, have few assets that the IRS would be able to levy, and don’t make an income above the minimum need for essential living expenses. There are strict regulations regarding all of the aforementioned options, so it’s in your best interest to file with a professional’s help. If you owe an unmanageable amount of back taxes and need filing back taxes help, talk to a tax preparer at Community Tax and determine the best route for settling your debt for less.
IRS Tax Debt Relief ScamsIn today’s tax relief market, there are many less-than-reputable companies that claim to offer tax debt relief, but offer something quite different. Here are a few signs that the debt relief service with which you are speaking may be a scam:
- The representative instantly promises to erase all of your debt
- The representative doesn’t ask to review your finances
- The business requests you by mail or email