Are you drowning in back taxes and unable to pay what you owe? Have you considered a tax settlement to help you get a handle on your finances?
While it’s true that the IRS appears to be a big, scary, all-powerful entity that could (in theory) take your money, your assets, and even your home, wage garnishment and tax levies are actually the last resorts to collect unpaid tax debt.
In reality, the IRS is often happy to reach an agreement that gives the agency a portion of the tax money owed and allows the IRS to close out your case. Such an agreement is called a tax settlement. (And the same goes for state tax debt. Your state tax organization is most likely willing to listen to a settlement offer, too.)
A tax settlement may allow you to settle your case for less than the original amount of money owed. You might also negotiate for a more favorable payment plan.
IRS wage garnishment is one of the most serious actions, short of imprisonment, that the IRS may take to collect unpaid tax debt. If the IRS files a wage garnishment against you, they take a percentage of your pay, before it even reaches your bank account, until your tax debt, associated penalties, and fees are paid off. The IRS can garnish as much as 50 percent of your wages, leaving you without enough money to live on or to pay other debts.
Even wage garnishment, however, doesn’t have to be the end of the world. There are a number of ways to stop wage garnishment, including negotiating a settlement agreement or an offer-in-compromise with the IRS. A tax professional such as a tax attorney or a tax relief firm can help you navigate these waters and reach an arrangement you can live with.
If you fail to file your tax returns on time and you owe the IRS money, or if you fail to pay your taxes on time, penalties and fees will be assessed. The IRS will attempt to collect the debt you owe. Failure to file your taxes could even result in a fine of up to $25,000 or a prison sentence of up to five years.
It’s always best to meet all IRS deadlines or file an extension and, if necessary, communicate openly about your inability to pay your taxes.
Business owners have many of the same options as individual taxpayers, including negotiating a settlement agreement, an offer-in-compromise, a penalty abatement, or a 45-day extension. A tax attorney or tax debt relief firm that specializes in business taxes can help you.
An installment agreement is a payment plan for your tax bill. It’s an agreement you reach with the IRS that permits you to pay your tax bill in equal monthly installments over a period of years. In order to qualify, you must owe less than $50,000 in combined tax debt, interest, and penalties. If you owe business taxes, you must owe less than $25,000.
You must also be up to date on all your tax filings and, if you are a business owner, you cannot be behind on payroll taxes.
Your installment agreement is based on your income and the amount of taxes owed. A professional can help you negotiate a fair arrangement.