When you’re a self-employed individual or an owner of a small business, there’s a chance that you’re not bothered much by tax, unlike your corporate counterparts. You are not trying to evade, but, rather, you are not informed of what you need to do regarding your taxes. You’ll be surprised when one morning, while you’re having a cup of coffee, a letter regarding tax debt makes its way to your mailbox. The amount indicated is quite a big one. Because of this, you start to panic. What are the things you can do to get yourself out of trouble?
According to Forbes, there are ten common tax issues. It is most likely that you’re having the same problem on the list. The list consists of accuracy-related penalties, trade or business expenses, gross income, summons enforcement, appeals from the collection due process hearings, failure to file and failure to pay penalties, charitable deductions, frivolous issues penalty, civil actions to enforce federal tax liens, and relief from joint and several liabilities.
There are ways to make things more bearable, especially if you’re caught off guard by the sudden turn of events. You can opt for tax debt relief options which will be beneficial for both parties.
One of the first options is to make a partial payment early on and to proceed to an installment agreement later on. The IRS has long-term payment plans at a reduced dollar amount, which is better than paying large sums at once. This is a great option if you are qualified for the Offer in Compromise program. It is also a good option for those hoping for a chance to get relieved for penalties and interest.
Another thing you can do is to file for a “Not Currently Collectible” program from the IRS. If you file for this program, the IRS will mark you as a person that has no ability to pay his or her tax debts. In order for your application for the program to be granted, you have to submit evidence for the inability to pay. This is one of the most effective ways to stop an IRS levy, lien, or denial of an installment agreement.
Similar to the “Not Currently Collectible” program, filing for bankruptcy is one way to make your debts a little easier to handle. This is the case if you qualify for Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 7 governs the process of liquidation, while Chapter 13 governs the reorganization of the debtor. While Chapter 7 makes the full discharge of debts allowable, Chapter 13 provides a restructuring plan and repays some of the debts. Based on where you fall, you will be able to reduce the debt that you owe.
You also have the option to work with your credit card company by consolidating tax debt with your loans and credit cards. This option is only available when there is still no federal tax lien on any of your property. If there is already a lien from the IRS, your tax lawyer can help you temporarily remove the lien so you can consolidate your debts with your loans and credit cards. This is a good way to reduce the interest because credit card companies often have lower interest rates compared to the ones used from IRS.
There are more tax debt relief options that you can do in order to ease the burden of paying your debt. With additional effort, you can do the filling and processing on your own. But you will have more advantages when you hire a lawyer’s services. Law is a complicated thing, especially the tax laws. It would be better if you acquire help from a tax law professional.
Some of the benefits in acquiring the help of a tax lawyer include their expertise in the subject, which helps them determine the best options for each unique case. Based on the framework they made, they will help you file for things and will remind you of the important time frames.
Being caught with an unexpected debt will make most of us panic and might resort to things that are not legal to compensate. However, there are legal steps to make your life easier when paying a debt. Keep the financial discipline and you’ll be able to make it.