Sandoval Tax

Owing The IRS Money

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Do You Owe the IRS Money That You Can’t Pay?

It can happen by accident. You may not have withheld enough from your paycheck in the past year and wind up with a whopper of a tax bill in April. It could be you came into some money, spent it, and didn’t realize that a big chunk of it was owed to the IRS in taxes.

If your debt has been piling up for a while, it can be overwhelming and extremely stressful. You might feel stuck or frozen, not knowing what you should do or how you are going to get out of your situation. But the worst thing you can do is nothing. The penalties and interest just keep adding up, sinking you further and further into trouble.

The IRS takes their money seriously! They will seek every legal way to collect the money they are owed. They can seize your assets, freeze your bank account, garnish your paycheck, and even restrict your passport. They can file levies and liens on your property. We hope this hasn’t happened to you yet, but it will if you don’t act fast enough.

Failure To Pay Taxes

If you owe money to the IRS but can’t pay, there are several options available to you depending on your circumstances. One of the most important things is to start paying you current taxes first. You must be all caught up with filing your income tax returns and paying your current taxes before most of these remedies are available to you.

Here are some of the options the IRS provides to taxpayers who owe money. Whether these are applicable to you depends on your circumstances.

Instalment Plan

This is where you work out a payment plan or a partial payment plan – just like a loan – to pay the debt owed to the IRS.

Offer in compromise

An offer in compromise is a plan presented to the IRS that shows how you will pay your debt. It’s based on your living expenses and what you can afford to pay on a regular basis. Some of your debt may be relieved as part of this plan. The IRS must accept the offer.

Not all tax professionals know the ins and outs of preparing an offer that has a good chance of getting accepted. It’s important to look for a professional who has an excellent track record of getting offers accepted by the IRS.

If this is your first “offense” with the IRS, you may be eligible for a First-Time Penalty Abatement, which waives your penalties.

“Currently Not Collectible” status

This status allows you to defer your debt. The debt does not go away; you still owe the IRS money. But you’ll stop the process of getting your bank accounts levied or other collection efforts if you are granted this status. This often happens when you don’t have enough income to cover your current living expenses. Once your income rises, the IRS will re-evaluate your situation.

Bankruptcy

IRS debt has “priority” when it comes to bankruptcy cases, and the debt may or may not get discharged if you file for bankruptcy. Since this is such a complex area, your best bet is to consult with several professionals – an accountant, a tax resolution professional, and an attorney that is expert at bankruptcy issues.

Consultation

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