Nobody enjoys dealing with tax problems. They’re time-consuming, difficult, and cause a lot of stress over time.
However, they’re often inevitable and must be dealt with promptly to avoid penalties. Fortunately, there are a handful of methods that can be used to resolve your tax issues.
But, before you get to the resolutions, it’s important to consider what causes tax problems in the first place
Common IRS Tax Problems
Receiving a notice from the IRS is unnerving in itself, but it’s not unusual. Here are some common IRS tax problems that any taxpayer can face:
- Tax return errors
- Underreported or Unreported income
- Failure to File tax return
- Failure to Pay the full amount
- Tax levy
- Tax lien
- Unpaid penalties and fees
Offer in Compromise
An Offer in Compromise (OIC) is applied when you’re struggling with a substantial tax debt. This program, run by the IRS, enables you to settle your tax debt for an amount less than the original one. It’s not easy to get, and there are strict requirements for it. But considering you qualify, it can greatly reduce your tax burden.
When considering an OIC, it is advisable to work with a reputable tax consultant company. The complex nature of OIC requires a comprehensive understanding of tax law. A professional tax consultant company has the right expertise to guide you!
Installment Agreement
If you cannot pay your tax debt all at once, an Installment Agreement is just another option you can avail of. This is where you can pay your tax debt in manageable monthly installments over a specified period of time.
The IRS tax representation is going to run a full background financial situation – including income, expenses, and ability to pay.
On that basis, they are going to point out a number that you’ve to pay in the monthly payment. Remember, timely payments are crucial as failure to comply can lead to severe penalties.
Partial Payment Installment Agreement (PPIA)
A PPIA is similar to an Installment Agreement but with one key difference: in case of a PPIA, you’re going to pay less than your total tax debt. This is an excellent option if you cannot afford the full payments of a regular Installment Agreement.
Once again, IRS agents are going to assess your financial circumstances and determine a suitable monthly payment.
Bankruptcy Filing
Filing for bankruptcy can be a drastic measure, but in certain situations, it may be your only option. Not all tax debts can be discharged through bankruptcy.
This option should be taken seriously. Prior to anything, consult with a tax planning service before considering this route. They can help you understand the implications and guide you through the process, ensuring that you make the best possible decision for your financial future.
Currently Not Collectible
Are you under a serious financial strain and cannot afford to pay any portion of your tax debt? Assuming yes, you may qualify for Currently Not Collectible (CNC) status.
This means the IRS determines that you cannot afford to pay your tax debt without causing significant financial hardship. While in CNC status, the IRS generally won’t attempt to collect your tax debt.
But, this is not a permanent solution. The IRS is still going to periodically review your financial situation to see if it has improved. If it has, you may be removed from CNC status and expected to start paying your tax debt.
Requesting Penalty Abatement
The IRS routinely imposes penalties and additional charges for not adhering to tax laws or regulations. If you find yourself unable to manage your tax debt due to escalating penalties, penalty abatement can be a choice for you. The IRS usually grants penalty abatement under exceptional circumstances, including qualifications under the First Time Penalty Abatement policy and circumstances that the IRS deems reasonable.
The First Time Penalty Abatement policy applies to those who didn’t file a return before, or hand no penalties during a span of the last three years.
Sure enough, you must be able to file all required returns and have paid or arranged a way to pay these dues.
Under Reasonable Cause, the IRS will assess all available facts to determine if you’ve made every possible effort to meet your tax obligations but were still unable to fulfil them.
If granted, your penalties could be significantly reduced or eliminated. Although this tax resolution method won’t absolve you of your tax debt, it can substantially lessen the amount you need to pay off.
Properly Filing Tax Returns
One of the easiest methods to solve your tax issues is to accurately file your tax returns in the first place.
Unpaid tax debt may stem from penalties and interest amassed from late or missing tax returns. Ensuring your tax filings are current and correct is the wisest way to address these issues.
Moreover, this process may reveal additional issues or overlooked benefits, providing an even more comprehensive resolution to your tax troubles.
Bottom Line
Tax problems are unsettling. But, don’t forget that there are options that are used to address them. The hack is understanding your options and choosing the one that best fits your financial situation.
Always remember that tube best thing to do in cases as severe as these is to get the help you deserve. They can offer valuable insight and guidance, ensuring that you navigate these challenging issues as smoothly as possible.
