Did You Receive a Letter from the IRS Regarding Your Tax Debt?
We all hate the Internal Revenue Service (IRS). This is because, no one loves paying taxes, especially with all the corruption in Washington. Still, the IRS is that pain that we must all live with and obey. Failing to submit your taxes is a crime that can lead to serious legal implications. Therefore, if you fail to pay your taxes, you will likely receive a letter about your tax debt. In this article, we will look at the options that are available to you and how you can address it.
Why People Owe the IRS
From a distance, the headline economic numbers from the United States look great. The unemployment rate is at a historic low, wages are rising steadily, the jobless claims are rising, and the number of job vacancies is more than the available jobs. However, the number of Americans who owe the IRS has been on an increasing trend. More than 8 million Americans owe the IRS more than $100 billion in back taxes.
There are several reasons for this. First, many people claim to be very busy to fill the paperwork. This is because many Americans are working two jobs, which means that they don’t have the time to focus on the paperwork. Second, there is the life disruption excuse like being ill, loss of a job, or a divorce. Finally, there are those people who don’t have the money to pay their taxes. Indeed, a recent report found that most Americans were living paycheck to paycheck.
Failing to pay the IRS can be a risky thing to do. This is because the IRS will come to you and it won’t be pretty. This is especially when you are below 65 years. To do this, as a single person, you need to make at least $10,000 a year. As the head of the household, you need to earn $12,850. If you are a couple filing together, you need to have at least $20k. These earnings thresholds go up a bit for older people.
The Fresh Start Initiative
In 2008, the IRS unveiled the Fresh Start Initiative (FSI) to help people with tax debt. Since most people who owe the IRS cannot make a lump sum payment, the FSI program gives them a longer period to make the payment. This period is usually about 6 years. During this time, the taxpayer will make payments based on their income and the value of their liquid assets. The program helps the IRS get the back taxes. It also helps it avoid the detriments of owing IRS, which include interest, penalties, garnishments, and seizure of assets.
There are three options for paying back the money using the fresh start initiative. First, there is an extended installment agreement, which is designed for people who owe $50k or less. This gives them 6 years to clear. Second, there is the offer in compromise (OIC). In this, the taxpayer makes an offer to settle the debt for less than what they owe. This offer must accurately describe your current financial status. Finally, there is the tax lien withdrawal. This is available to people who agree to pay their tax debt through a direct debit option.
Tax Debt Relief Service
If you have a substantial amount of IRS debt, you might consider using the service of tax professionals. These professionals will look at your current status and recommend a good way to deal with it. However, you need to be wary of many tax-relief companies because many of them are scams. Many of these companies are known to make wild claims about helping you clear the debt. While some of them are legitimate, they don’t do something that you can’t do yourself. There are a few things that can help you spot illegitimate companies. Some of these red signs are:
- Companies that guarantee to forgive your IRS debt.
- Companies that pledge to have the penalties waived.
- Companies that solicit business from you through emails and letters.
- Companies that have very negative reviews online.
- Companies that don’t assess your financial background.
Owing money to the IRS is a difficult thing. It is one of the most challenging things you might go through. Many people have reportedly gone into depression or even committed suicide because of the battles they have with the IRS. If you have such a debt, we recommend that you talk with a tax expert, who will help you on the best way forward.