Understanding Income Tax

Understanding Income Tax

Governments need money to function; therefore, you are required to pay income taxes each year. The amount of taxes you’re required to pay depends on your income. This includes your employment salary, interest, dividends, and lottery winnings. Income taxes are the largest source of income for the federal government.

Each year, many people fall behind on paying their taxes. If this happens, the IRS will put pressure on you to pay them what you owe. Having back taxes can put you in substantial debt and can be difficult to recover from. If you don’t pay what you owe, the IRS can then place liens on your property or garnish your wages. However, it is possible to settle with the IRS.

When considering a settlement with the IRS, it is wise to get a tax attorney to help you. It is not easy to negotiate with the IRS, and there are certain procedures that must be followed. Following these procedures, it could be possible to get the interest and additional fees reduced or receive a brief extension. In some cases, you can make the IRS an offer to pay them a portion of what you owe. That’s where a tax attorney would be able to help.

Tax and Debt Relief

Owing the IRS money that you cannot pay can be a very stressful experience. If you owe money, it’s a good idea to research your options to see what forms of relief are available. Some of the tax and debt relief options include:

  • Filing an amended tax return: One way to lower tax debt is to file an amended return after the deadline. Maybe your liabilities were not as great as you once thought, and maybe you did not state all the deductions you deserve. A tax attorney can help you with this.
  • Offer in Compromise: If you cannot pay the money you owe to the IRS, the agency might accept an Offer in Compromise. This means the IRS may accept a smaller amount as your final payment. The IRS considers your current financial situation when deciding if this is an option.
  • Installment Plans: If you cannot pay the full amount of your taxes, but could pay them back over the course of a few months, the it is possible to negotiate a payment plan with the IRS. This will prevent the agency from placing liens or garnishes against you.
  • Bankruptcy: You cannot always discharge your tax debts with bankruptcy, but you could explore your options. You could file Chapter 7 bankruptcy, but only certain debts will qualify. A lawyer can help you discover if you qualify for bankruptcy to eliminate tax debt.
  • Penalty Relief: The IRS offers a “Fresh Start” initiative that gives help to people who are having trouble paying taxes. If you are unemployed, this program could relieve you from paying taxes. You can check with the IRS to see if you qualify for this.

Tax Advice and Negotiation

Compromising with the IRS is not easy, and it can cause a lot of anxiety. Depending on your current financial situation and how much you owe, you could try to negotiate with the IRS to pay them one lump sum or pay in installments. In some cases, it is possible to have your debt completely forgiven.

In the last few years, the IRS has been more willing to negotiate. However, don’t just ignore the problem; you need to face it. If you owe the agency more money than you can pay, you need to file a return anyway. This will likely reduce some of the penalties you might receive. The IRS will not instantly go after you for back taxes. It will most likely take a few months before collection efforts begin.

You will receive letters at first, and after a little while, the agency will begin to get more aggressive. This could mean garnishing your wages. Being pursued by the IRS can destroy your reputation and hurt you financially. Any option is better than simply avoiding them.

The IRS is often open to installment agreements, which you can inquire about directly through the agency. You can call a representative from the IRS to explore your options, and they may recommend paying your taxes each month over a set period of time. If the IRS believes you have the money to pay the taxes, they will probably not offer a compromise.

When you attempt to negotiate with the IRS, it’s best to let them know that the debt will be paid in less than two years, but no longer than five. Negotiate for as much as you can afford each month. It is essential that you stick to your payments. If you do not make a payment, the IRS might try to seize your property or garnish your wages. Unfortunately, they also have the power to seize your bank accounts. It is important that you be honest with the IRS, as this can lead to a more amicable exchange.

When attempting to negotiate with the IRS, it’s best if you seek representation from a tax attorney. They can help you negotiate favorable terms that you may not be presently aware of.

Tax Attorneys and Accountants

If you cannot pay your taxes or have an issue to dispute, a tax attorney can help you solve the problem. Your attorney is protected by the client-attorney privilege, meaning you can be honest with your attorney because they cannot testify against you.

A tax attorney can respond to an IRS audit and deal with collection notices. They can help put a stop to the garnished wages or liens on your property. Additionally, they can sort through tedious documents and explain each step of dealing with the IRS. An attorney can communicate with the IRS on your behalf as well, making them an integral part of a proper negotiation. The agency is more likely to answer the questions of your attorney rather than answering your questions.

A tax attorney can help you negotiate with the IRS and help you complete an Offer in Compromise agreement to offer a settlement. Your attorney can also help you negotiate an installment agreement. A tax attorney is a necessity when dealing with the IRS.

A tax accountant can also help you with dealing with the IRS. An accountant can help you file an amended return if you have missed something on your first return. They can go through your taxes to see if you did not include a deduction or if your assets were too much. They can also make sure your tax return was accurate, as they would have better insight into the process.

Income taxes are not easy to comprehend which leads people towards choosing not to file them. Not paying your taxes can get you in trouble and is considered a Federal crime. Help is available if you know where to turn.