Los Angeles is one of the most expensive places in the country to live. The cost of real estate, food, and gas are higher than in other places — and so are the state taxes. L.A may have more than its share of movie moguls and high-flying executives, but most of the citizens are just ordinary people trying to make ends meet.
With costs so high it’s not surprising that so many people get into arrears with taxes. Fortunately, if you need tax relief, Los Angeles residents have several options. The IRS and the state can take a number of actions against you to collect any back taxes you owe, and some of those actions can leave you in financial hardship. If you find yourself in this position, you should seek advice regarding the tax relief options available to you.
The most cost-effective and straightforward way of avoiding any penalties is to pay your taxes in full and on time. If you don’t have the means to settle your tax liability yourself, you could try to borrow the money.
If you have a good credit status, you might consider applying for a bank loan. The interest on a loan might be less than the interest and late payment penalties that the tax authorities would add to your tax debt daily. However, you should only get a loan if you are sure that you can make the repayment; otherwise, you will just be moving your debt problem to a different institution.
If you own a house, refinancing the property might be an option to release some equity. This is a serious decision and should be undertaken only if it is appropriate for your situation. If you are unsure whether this is the correct route to paying your back taxes, you should seek debt relief advice.
If there is no way you can raise the money to pay your taxes in full, you have several options to settle your debt or halt the collection process.
The IRS and the State of California Franchise Tax Board both enable you to apply for an agreement to pay your tax liability in installments, although they impose different conditions. With the IRS, you might be eligible if the following are true:
The state tax board will consider you if you meet the following conditions:
If you are accepted for an installment payment agreement, interest will be added to the outstanding balance and compounded daily. Late payment penalties will also be imposed. It is advisable to pay as much up front as you can and make the agreement for the shortest period you can manage.
An offer in compromise is an agreement to let you pay off your debt for a lesser amount than you actually owe. The IRS and state tax board always try to collect the full amount of your tax liability. However, they may approve an offer in compromise if the amount you offer is the most they can expect to collect within a reasonable period of time.
The factors that will be taken into account include the following:
You will need to provide full financial disclosure for the tax authorities to ascertain that you are really not able to pay your entire tax liability. Your offer in compromise could be considered frivolous if you are clearly not eligible, and you may receive additional penalties.
The Franchise Tax Board will require you to pay the full amount of the offer in a single lump sum. The IRS will allow you to pay by agreed-upon monthly installments.
If you file your tax returns jointly with your spouse, you will both be responsible for your tax debt. But if your spouse, or ex-spouse, has entered erroneous items on the return without your knowledge, you may be able to claim innocent spouse relief.
To qualify for relief from jointly filed taxes, interest, and penalties, you have to meet the following criteria:
If the IRS or state tax board believe that they will be unable to collect your tax liability now or in the foreseeable future, the debt could be assigned “currently not collectible” status. This is a temporary delay in the tax collection process. You might qualify if the following are true:
Under this status, the debt is not canceled, and it continues to incur interest charges and late payment penalties. If your financial status improves, you will still be liable for the increased debt
Deciding the best course of action for your individual circumstances is not easy. Solvable can match your personal needs with trusted debt relief providers. We will guide you through the debt relief process.