Are you currently in a position where the internal revenue service or state authorities are requesting money from you? Regardless of the situation, you are facing currently, owing money to IRS is not the right idea because it could lead to wage garnishment and clearing of any balance on your bank account. Nine out of 10 times, you require a tax professional to help you navigate through these tax issues. As an individual, unless you really understand the requirements, you may end up paying more for the service. Owing money to the IRS is different from owing money to a friend or bank credit card. The internal revenue service has recently expanded their collection ability and you may end up losing more if you are not careful. The taxman can garnish your income from social security, levy assets without going through any legal process. In some situation, they may file tax lien which means they can potentially seize your property such as cars, real estate and other physical assets you may have to clear your debts.
This is the most uncomfortable situation that you could find yourself in and you should find the right services to help you overcome state debt. Perhaps you got divorced, lost your main job or had a sudden change in your financial well-being and this prevented you from making a regular payment to the tax body. Here you will be receiving phone calls and letters from the federal tax authorities requiring you to pay the debt on time. There are many reasons why people have issues with the tax body but the most important thing is to get professional help. Common reasons why people have tax issues include:
Failure To File Your Tax Returns
This is the main reason why many people are caught in a fix by the tax authority. It is not against the law to owe money to the taxman but it is against the law not to file the return when you surpass a certain minimum income requirement. If you do not file your returns on time, the internal revenue service will substitute for return or SFR. This type of filing will list all your income and will not feature allowable deductions. The result of this is that you will end up paying or owing more in charges and interest, which may not be accurate if the returns had been filed properly. In many situations, as a taxpayer you should file a federal tax return, if you fail to file your taxes on time, the state will file it on your behalf. In such cases, the state does to take into account all the deductions that you are allowed. The tax authority will place you in a higher tax bracket and you will have to pay an amount that is higher with an increased interest.
Incorrect Tax Return Preparation
In some cases, there are a number of reasons that could lead to mistakes during filing of returns. Maybe your accountant rushed during the process just to meet the deadline and did not grasp all the information required to complete the return. This is a common situation for many taxpayers, any error committed can be costly because penalties can sky rocket to up to 75% of the tax debt.
Late Tax Payments
In many cases, business people do not pay quarterly estimated tax payments during a financial year. The tax debt will accumulate in the following year and you may not be in a position to pay the debt because the cost is so high.
Early Withdrawal Of Retirement Funds
The internal revenue service will impose a 10% for 401(k) for any withdrawals that is done before the age of 59 ½ years for any unqualified withdrawals. In other cases, under withholding may cause an increase in the taxes that you owe the IRS. Moreover, a closer look at the company tax returns may lead the taxpayer to look at your returns. Based on the audit, you may be subject to additional taxes because of disallowed deductions or penalties.
Gambling winnings and claiming dependent that is not rightful
If you win a lottery or any other gamble, the income must be included when filing your returns. This could lead to a sudden increase in tax owed to the IRS. You can find yourself in trouble if you do not file the returns properly. There are a number of rules regarding tax for dependents and this can be confusing. If you file returns inaccurately, you could later be penalized by the IRS for claiming inaccurately.
Unpaid payroll taxes
The withholding made from employee salaries are held in trust by a business is supposed to be forwarded to the internal revenue service. Failure to do so will be seen as theft by IRS and this can be detrimental because the tax body will enforce tax interest on your income. Failure to pay can result in a personal assessment of penalties, fines, and debt. The internal revenue service may increase the tax owed by the company for failure to disclose the unpaid payroll taxes.
Mistakes from Tax Company
For you to make better financial choices, you need a company that understands the tax authorities and all the regulations imposed by the tax body. In most cases, understanding the tax law by yourself can be challenging and you may require a tax company to handle the returns for your company or for your own tax. When your tax company makes mistakes, you could be liable for tax penalties, levies from the IRS, and this is crucial because you are trying to avoid extra charges.
What Are The Solutions To Your Tax Debt?
The internal revenue service is the most powerful debt collection agencies in the United States and they have a wide array of methods in collecting what you owe them. However, taxpayers can take a sigh of relief by knowing that there are options that you can use to avoid complication from tax cases. These include:
Offer in compromise
An offer in compromise is an agreement between the taxpayer and the IRS that would significantly reduce the tax liability that you owe the tax body. The internal revenue service accepts less than full payment in some special circumstances. There must be a genuine dispute on the amount owed as to whether the taxpayer will be in a position to repay the debt.
In most scenarios, taxpayers owe large sums of debt and they are unable to repay the debt on time. This can lead to serious implications from the internal revenue service. You can reach an agreement with the IRS and you can be in a place to make payments towards the tax payment in a smaller and manageable amount. The ideal payment plan is that you make partial payments until you clear your debt with the tax body.
Penalty abatement is typically available for first-time players and it is linked to a regular installment agreement. It is not possible to abate the interest you want to abate is based on penalties. Penalties can be removed if you paid the debt in full through monthly installments and the taxpayer must show due diligence in resolving debt and being compliant with the rules and regulations of the tax body.