No one ever said being a grownup was easy. Sure, there are
some perks. But above all else, adults are expected to be responsible. They
have to go to work, raise their kids, and pay their taxes. That�s how the whole
human comedy keeps perpetuating itself. Of course, every now and then it hits a
snag.
America has earned a rather bad reputation for debt in recent years. The United
States is officially the world�s biggest debtor nation. It�s easy to blame the
government for this imbalance. After all, they played a part in creating the
record trade deficit. But when it comes to personal debt, Americans must accept
responsibility.
Most shoppers know that credit card debt is out of control. The average family
is saddled with around ten thousand dollars of credit card debt. But did you
know that Americans also owe more in back taxes than any other nationality?
According to the latest figures, there are over twenty million delinquent
taxpayers in the U.S. They owe in excess of two hundred billion dollars in back
taxes. The agency that is responsible for collecting these debts is the
Internal Revenue Service (IRS).
No one likes getting a call or a letter from the IRS. They are arguably the
most feared government agency in America. On average, they audit around one percent
of taxpayers each year, and almost a third of those audited are among the
poorest taxpayers, people who claim the Earned Income Tax Credit. An audit is
triggered when automated IRS review processes identify tax returns that meet
certain specified criteria. Being audited means the IRS thinks you are cheating
or making errors. Either way, they want the behavior to stop and they think you
owe more money than you paid. This is not, however, a criminal offense.
Millions of Americans make mistakes on their tax returns each year, many due to
the complexity of the current tax code.
What to do about tax debt?
When a taxpayer is audited, it means he claimed a deduction or exemption the
IRS disagrees with, or that he failed to report income on a tax return. Many
audits leads to a tax bill that gets sent with the audit findings. But no
matter how you wound up with tax debt, the question is, what now? If the audit
findings or IRS tax bill require you to pay more than you can afford to pay in
one payment, you now effectively have a tax debt. Having an outstanding tax
debt is not the end of the world; it�s not even uncommon. It is, however, a
matter that should be addressed as soon as possible.
Like all debts, tax debts cannot be simply wished away. In fact, they get more
expensive if you ignore them. Fines, penalties, and interest fees can really
add up. A tax professional can help you negotiate a manageable agreement with
the IRS.
Installment Plans
The first thing a tax consultant will do is examine your tax situation, your
finances, and your IRS debt. Once they know what you owe and assuming you have
filed all tax returns and are in current compliance with the IRS, tax
accountants can contact the IRS on your behalf and attempt to negotiate a
payment plan you can afford. But the IRS is not like most creditors. They tend
to dictate what you can afford to you, as opposed to negotiating with you to
determine an amount you think you can afford. Because so many Americans owe
back taxes, IRS agents will work with you on a payment plan, but they are going
to want you to pay what you owe in a reasonable period of time, usually no more
than 36 or 48 months.
Partial Payment
If the taxpayer or his representative can prove that he cannot afford to pay
his tax debt in full, even over time, the IRS payment plan may include a
partial payment agreement. This means that the taxpayer will pay what the IRS
agrees he can afford, which may be less than the amount necessary to pay the
debt in full before the statute of limitations kicks in and the IRS ceases
attempts to collect the debt. Typically, tax relief is only available to
taxpayers who cannot afford installments or if the IRS made significant
mistakes along the way.
some perks. But above all else, adults are expected to be responsible. They
have to go to work, raise their kids, and pay their taxes. That�s how the whole
human comedy keeps perpetuating itself. Of course, every now and then it hits a
snag.
America has earned a rather bad reputation for debt in recent years. The United
States is officially the world�s biggest debtor nation. It�s easy to blame the
government for this imbalance. After all, they played a part in creating the
record trade deficit. But when it comes to personal debt, Americans must accept
responsibility.
Most shoppers know that credit card debt is out of control. The average family
is saddled with around ten thousand dollars of credit card debt. But did you
know that Americans also owe more in back taxes than any other nationality?
According to the latest figures, there are over twenty million delinquent
taxpayers in the U.S. They owe in excess of two hundred billion dollars in back
taxes. The agency that is responsible for collecting these debts is the
Internal Revenue Service (IRS).
No one likes getting a call or a letter from the IRS. They are arguably the
most feared government agency in America. On average, they audit around one percent
of taxpayers each year, and almost a third of those audited are among the
poorest taxpayers, people who claim the Earned Income Tax Credit. An audit is
triggered when automated IRS review processes identify tax returns that meet
certain specified criteria. Being audited means the IRS thinks you are cheating
or making errors. Either way, they want the behavior to stop and they think you
owe more money than you paid. This is not, however, a criminal offense.
Millions of Americans make mistakes on their tax returns each year, many due to
the complexity of the current tax code.
What to do about tax debt?
When a taxpayer is audited, it means he claimed a deduction or exemption the
IRS disagrees with, or that he failed to report income on a tax return. Many
audits leads to a tax bill that gets sent with the audit findings. But no
matter how you wound up with tax debt, the question is, what now? If the audit
findings or IRS tax bill require you to pay more than you can afford to pay in
one payment, you now effectively have a tax debt. Having an outstanding tax
debt is not the end of the world; it�s not even uncommon. It is, however, a
matter that should be addressed as soon as possible.
Like all debts, tax debts cannot be simply wished away. In fact, they get more
expensive if you ignore them. Fines, penalties, and interest fees can really
add up. A tax professional can help you negotiate a manageable agreement with
the IRS.
Installment Plans
The first thing a tax consultant will do is examine your tax situation, your
finances, and your IRS debt. Once they know what you owe and assuming you have
filed all tax returns and are in current compliance with the IRS, tax
accountants can contact the IRS on your behalf and attempt to negotiate a
payment plan you can afford. But the IRS is not like most creditors. They tend
to dictate what you can afford to you, as opposed to negotiating with you to
determine an amount you think you can afford. Because so many Americans owe
back taxes, IRS agents will work with you on a payment plan, but they are going
to want you to pay what you owe in a reasonable period of time, usually no more
than 36 or 48 months.
Partial Payment
If the taxpayer or his representative can prove that he cannot afford to pay
his tax debt in full, even over time, the IRS payment plan may include a
partial payment agreement. This means that the taxpayer will pay what the IRS
agrees he can afford, which may be less than the amount necessary to pay the
debt in full before the statute of limitations kicks in and the IRS ceases
attempts to collect the debt. Typically, tax relief is only available to
taxpayers who cannot afford installments or if the IRS made significant
mistakes along the way.
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