7 Questions You Should Be Asking When You Have Tax Debt Over $10,000
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As the saying goes, “Only two things in life are certain: death and taxes.” There is also the certainty of the Internal Revenue System (IRS) inflicting severe consequences if you fall behind on your yearly filings. This is because taxes are an essential part of a functioning society and are the government’s primary source of revenue.
One could fall behind on their taxes for many reasons; but fortunately, there are ways to address it and fulfill your tax obligation. Your first step should be to seek the help of a professional, especially if you owe more than $10,000 to the IRS.
1. How Does Tax Debt Occur?
Contract Work
1099 workers or contract workers tend to fall behind on their taxes more often than full-time W-2 employees because W2 employees are subject to having their taxes withheld from their paycheck. 1099 workers, on the other hand, are not subject to those same conditions and may not be diligent in paying their quarterly estimates or setting aside the money throughout the year to cover their taxes.
Miscalculations
Miscalculation of taxes happens more than you think, which is why it’s essential to engage the help of a tax professional when it’s time to do your taxes. While this is relatively easy to clear up with the IRS, you must correct the mistake by the amended deadline, otherwise, you will be charged penalties and fees.
Underpayment
Underpaying taxes is another reason for accumulating tax debt. While underpayment is not usually punished with jail time, you could be subject to high interest and penalties if you don’t fulfill the rest of your payment. However, paying your taxes in good faith and by the extended deadline can absolve you from potential tax fraud.
Divorce
Divorce can often lead to tax debt issues if financials are combined, especially if there are businesses involved.
Not Having a High Enough Withholding
Not having a high enough tax withholding throughout the year may lead to higher paychecks, but when it comes time to pay taxes, individuals may end up owing a lot more.
Business Taxes
Business taxes can prove to be complicated, and sometimes they’ll result in tax debt. The help of a professional when it’s time to do your business taxes can help you do your taxes correctly and, potentially, help you save money by finding deductions you might not have known about.
2. What Happens if I Have Over $10,000 in Tax Debt?
Tax debt is not uncommon, and can be eventually paid off if you take action quickly. However, when the amount you owe exceeds $10,000, your situation can become much more severe. In this case, the IRS may take more aggressive collection measures and enforce numerous penalties until you pay the amount owed in full.
3. What Actions Do the IRS Take?
Levies
The IRS can seize your accounts, essentially stopping you from accessing your bank/money accounts. This is detrimental to people’s lives.
Liens
A lien is placed on your property. If the IRS places a lien on your property, you won’t be able to sell it. It would cause other issues for mortgages as well. Having a lien on your property is never a good thing, and something to be avoided.
Garnishing wages
If you’re a W2 employee, the IRS can actually garnish your wages. Meaning they’ll take that money before it’s even paid to you from your employer. That’s a scary thing to happen, and it definitely means it’s time to get professional help.
Help With Your Debt
4. Can I Work Out a Payment Plan With the IRS?
5. Are There Any Other Tax Debt Programs Available?
Negotiating with the IRS can be intimidating and stressful. Fortunately, businesses and individuals can engage the help of tax relief companies to navigate the process and achieve a favorable outcome for their tax difficulties. With the help of a tax relief company, like Tax Relief Advocates, you can make more informed financial decisions regarding your tax debt as they are well aware of the ins and outs of tax law and how to work with the IRS.
6. Can a Tax Debt Program Eliminate my Debt Altogether?
While a tax debt program can’t eliminate your tax obligation altogether, they can certainly make the process far less stressful. These programs can help you take control over your finances by allowing you to set up a payment plan or negotiate a settlement, making things much more manageable. In some cases, a taxpayer may find their total amount due is lower than they originally anticipated. That’s one more reason to work with a professional tax relief firm like Tax Relief Advocates. They’ll look through all documentation and information to see what you truly owe or not.
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7. What's the Best Thing I Can do to Get my Situation Under Control?
Tax debt is overwhelming, whether it’s at the business or individual level, and can lead to a slew of financial setbacks and even criminal penalties. When the IRS threatens to take your home, garnish your income, and empty your bank accounts, taking action right away is the best thing you can do to avoid more hardship. If you’re unsure of where to start or aren’t able to pay your amount in full, you may want to reach out to a tax relief firm. Many individuals who are dealing with tax debt prefer to have a professional firm helping them with their situation, making sure no more actions are taken against them and that they get the best possible outcome. You can get in touch with the experts at Tax Relief Advocates today to get help.
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