Trapped By Taxes? Getting Back On Track
By: John RzepkaIt is nerve wracking trying to go about your daily life knowing that you owe back taxes. You may feel scared, confused, and ashamed. YOU ARE NOT ALONE. Many people and businesses are in the same situation. We are all human and make mistakes. It is not hard to fall prey to debt during troubled economic times. A tax problem should not impede your ability to live your life to the fullest; however, the debt will not just go away on its own either. There are options for you to consider.
Where do I start? This may be the hardest part of the process of becoming, and staying, debt free. Chances are the back taxes owed are accruing interest or other monetary penalties. The quicker you become proactive, the less overall you will end up paying. The first thing you should do is get educated. The more knowledge you acquire in turn will help you feel more in control of your situation. Talking to an expert in the tax field is highly recommended. Find a professional tax expert to sit down with you and discuss your specific concerns, payment options, and possible programs available to your case.
Don’t fall for the scams!! It seems that everywhere you look businesses are offering to get people out of debt for “pennies on the dollar”. BE VERY WARY of these agencies. These agencies tend to prey upon businesses and people that are already scared and confused as discussed earlier. There is no magic plan to erase your debt! There are, however, some government programs available if specific qualifications are met. This article will discuss those options in further detail.
Bankruptcy: The “easy way out”? Some people believe that bankruptcy is the only solution to their back tax problems. Although it may be the right solution for your specific circumstances—everyone’s states of affairs is different—do not believe in any way, shape, or form that this is an easy way out of debt. Filing for bankruptcy can have adverse impact on your credit scores, ratings, and if you are filing a business bankruptcy, ramifications can include damaging your community reputation. A professional tax expert can discuss in detail the bankruptcy pros and cons for your set of circumstances. As with most of life’s larger transitions—and bankruptcy is—it can take its toll emotionally, physically, and can create friction with family relationships. Having a cast of strong and supportive individuals in your life is highly recommended when considering this avenue. Bankruptcy does not always discharge back taxes. There are several factors that play into this. A tax expert should carefully explain these factors with you.
Other Tax Relief Options
- Offer in Compromise The Offer in Compromise (OIC) is a program offered by the Internal Revenue Service. Not a lot of people are aware of this program, and the IRS doesn’t routinely publicize it. It allows individual and business taxpayers with an unmanageable tax debt to negotiate the payment amount with the IRS – not just negotiate a payment schedule, but the amount to be paid. The name of the program says it all: the taxpayer offers a compromise to the IRS and negotiations begin.
It’s not as easy as pulling a number out of a hat, however. There are regulations that must be followed, detailed financial paperwork to fill out, and needs-based calculations to undertake. Navigating through the IRS and negotiating with them can be difficult for taxpayers who go it alone. An experienced professional consultation is recommended before filing for this program.
Installment Payment Agreement A monthly payment plan can be set up to pay back the taxpayer's tax liability. The IRS has guidelines as to what amount they will accept and the timeframe they will accept it in. A financial profile is required from the taxpayer before the tax resolution professional can negotiate an installment agreement.
Currently Not Collectible When economic hardships arise, a taxpayer may not be able to afford to pay the IRS due to a lack of assets and low income or no income at all due to a layoff or downsizing. The IRS can deem the taxpayer “Currently Not Collectible” and agree that their tax liability will be waived for the time being. Although this is not a permanent solution it will alleviate immediate stress, as well as give the taxpayer some breathing room to plan a long term solution.
Conclusion This article does not offer all possible solutions to help pay back past due taxes to the government. Each case is different and should be discussed in detail with a tax professional. The burden of owing taxes can be unbearable at times. If you take a proactive approach, you will do yourself an immense favor by taking back your finances and moving toward financial freedom.
Author Resource: Tax Resolution Specialists believes that for every tax problem there is a solution. We are a local, West Michigan based law firm that has specialized in helping individuals and businesses resolve their tax problems for over 10 years. We help clients understand their legal rights, represent them in front of the IRS, State, or City, and work with them to successfully resolve their tax issues. Don’t let the letters pile up - contact us to start freeing yourself from the burden of your tax debt.
John Rzepka is the head of Tax Resolution Specialists client service team and is an enrolled agent (empowered by the U.S. Department of Treasury to represent taxpayers) who previously served on staff for 15 years as an IRS agent. He has more than 30 years of experience in the field of taxation and brings an insider’s perspective as well as a wealth of industry contacts to help cut through government bureaucracy.