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If you can pay the tax bill, including all fees and penalties, by the due date, your best course of action is to pay it.
But if you don’t have the money to pay your tax bill in full, do not ignore it! Ignoring a tax bill or collection letter will only cause fees and penalties to continue adding up. With time, unpaid tax bills can lead to wage garnishment, an IRS tax lien, or a levy. The IRS may also seize your personal or business assets (depending on the taxes owed). In a worst case scenario, unpaid taxes can lead to jail time.
It’s always best to stay in communication with the IRS and understand that you have options. Some people decide to negotiate with the IRS on their own. Here at Solvable, we don’t recommend that. You have other options, including hiring a tax attorney or a tax relief firm to help you negotiate an installment agreement, an offer in compromise, penalty abatement, or another legal way to help you manage your tax bill.
Reputable tax debt relief firms typically don’t request upfront fees, but will collect a portion of the money you’ve saved with a tax settlement. Tax attorneys may charge upfront fees for their services, but if you are facing a tax levy or wage garnishment, and your tax debt is substantial, hiring a professional is better than the alternative of having your assets or paycheck seized by the federal government.
You can save substantial amounts of money with an offer-in-compromise agreement, including having penalties, interest, and fees waived. However, a reputable tax relief firm will not make promises about how much money they can save. The tax professionals will want to review your situation thoroughly in a face-to-face meeting.
Even more important than the cost savings, though, is the peace-of-mind you’ll receive from facing your tax debt head-on and knowing there is a professional you can trust on your side against the IRS.
You will only have one payment a month to make, which will make your bookkeeping far easier. Furthermore, there will be just one lender to deal with which will also make your life a lot easier. This also means there will be just one number to call when you have a question about your loan.
Another big advantage is that there will be just one interest rate to deal with. So it might be possible to lower the interest rate on all of your student loans. Finally, you may be able to take advantage of the deferment and forgiveness options available through the U.S. Department of Education’s Federal Direct Student Loan Program.