Taxes are an important component of organized civilization. Governments collect taxes to build roads, fund programs and maintain militaries.
However, taxes can be difficult to understand for the average citizen since the United States’ tax code is enormous and continually expanding. Unfortunately, this confusion leads to false assumptions or misinterpretations of how much people should set aside to pay in taxes.
An estimated 20% of taxpayers will not withhold enough money from their paychecks, and they end up owing a balance to the Internal Revenue Service (IRS). Many people fall behind on their tax payments and can slip into tax debt, which has immense financial repercussions.
Fortunately, many tax relief programs are available through the IRS and through tax relief professionals.
This article will describe how tax relief works and how consumers can prepare for a tax bill and work towards getting out of tax debt.
The IRS is responsible for collecting taxes, managing government revenue, and apportioning funds to the programs that need them to operate. The IRS is very efficient, and they have many methods of auditing and collecting money from entities that do not pay their balance.
Some collections methods include wage garnishment, which means they can take portions of your paycheck out before it even reaches your bank account. They can also put liens on your property and levy on your assets.
Although tax debt can be intimidating, the IRS is not a heartless organization. They have many programs that can help taxpayers manage their tax debt through monthly payments and limited forgiveness opportunities.
There are many reasons that a tax bill may be more than expected which can cause a significant personal financial liability. For example, someone can sell highly appreciated assets that can incur short-term capital gains tax. Short-term capital gains tax is treated as ordinary income, which can be extensive if the investor doesn’t save enough funds for tax time.
Another example would be if someone lowered their tax withholding amount on their paycheck too much, which means a much higher tax bill.
Regardless of how someone incurs tax debt, it can be difficult to manage once it is there. Below are a few tips for managing tax debt if you find yourself owing a significantly higher balance than anticipated.
File your taxes. Even if you cannot afford to pay all of your taxes due at once, you should still file your tax return, so the IRS has the information. Once you file the return, you can open a case with the IRS directly, or you can hire a tax relief firm to help you organize your tax situation before going to the IRS.
You should also remain calm. The IRS will not start seizing assets or employing collections
tactics immediately, especially if you are proactive with them.
Do not avoid filing your taxes. If the IRS sees that you delay filing your return, they may perceive that as attempted tax evasion. They will be more difficult to work and potentially less forgiving if you hide your income and skip your tax return.
Don’t panic. Many taxpayers find themselves in tax debt annually, and there are plenty of options for tax relief. Many scammers prey on people with tax debt because they can appear to be in a more vulnerable position.
There are two forms of tax relief – options for people who are up to date on their payments and those who owe back taxes and have prior balances.
Taxpayers paid up with the IRS and filing their taxes for the current year should prioritize lowering their taxable income and net tax bill. Tax deductions, tax credits, and tax exemptions are all excellent options provided to American taxpayers to use on their tax returns.
Consumers who currently have tax debt and need solutions to help reduce the financial burden of a tax balance have a few powerful options that they can employ to assist their tax situation:
Tax debt can seem daunting at the beginning, but by maintaining an open discourse with the IRS and staying proactive with their repayment options, they will most likely not incur serious collections behavior from the IRS.
If you want to learn more about tax relief companies and how they work, be sure to read our other guides and reviews.