Why You May Have Tax Debt
There are a number of reasons why you might have tax debt. Maybe you failed to file your taxes one year or forgot to pay taxes owed from a previous year. Perhaps you made a mistake on your tax return, or you’re self-employed and didn’t withhold enough taxes from your income. Whatever the reason, if you have tax debt, it’s important to take action as soon as possible to avoid further penalties and interest charges.
What Happens If You Don’t Pay Your Taxes
If you don’t pay your taxes, the IRS will begin taking steps to collect the money you owe. The first step is usually sending a demand letter, which gives you 30 days to pay your tax bill in full. If you don’t pay or make arrangements to set up a payment plan, the IRS may take additional actions, such as:
- Filing a notice of federal tax lien, which is a public record that alerts creditors that the IRS has a legal claim to your property.
- Levying your wages or bank account, which allows the IRS to take money directly from your paycheck or bank account to pay your tax debt.
- Seizing your assets, such as real estate or vehicles.
What To Do If You Have Tax Debt
If you have tax debt, there are several options available to help you resolve it. Here are six steps to take if you have tax debt:
- Don’t ignore it: The biggest mistake you can make is ignoring your tax debt. It won’t go away on its own, and the longer you wait to take action, the worse it will get. As soon as you realize you have tax debt, take steps to resolve it.
- Get professional help: Trying to deal with the IRS on your own can be complicated and frustrating. If you have tax debt, it’s a good idea to get professional help from a tax relief attorney or tax resolution specialist. They can help you understand your options and negotiate with the IRS on your behalf.
- Know your rights: The IRS has a lot of power when it comes to collecting taxes, but there are limits to what they can do. It’s important to know your rights so you don’t let the IRS take advantage of you.
- Understand the process: The tax resolution process can be confusing and intimidating. Before you take any action, make sure you understand the process and what to expect at each step.
- Negotiate with the IRS: The IRS is willing to negotiate with taxpayers who cannot pay their tax debt in full. There are several options available for negotiating a payment plan or settlement, and a tax relief attorney can help you explore these options and negotiate on your behalf.
- Be prepared for next year: Once you’ve resolved your tax debt, take steps to make sure it doesn’t happen again. If you’re self-employed, make sure you withhold enough taxes from your income. And if you have a tax refund coming, use it to pay down any outstanding debt so you don’t end up in the same situation next year.
If you have tax debt, don’t wait to take action. The sooner you get help, the easier it will be to resolve your tax debt and avoid further penalties and interest charges.