Taxes are nerve wracking for most people. With an increasing number of Americans falling into debt each day, tax debt greatly adds to the financial stress. Therefore, it’s very important to find ways to relieve yourself from the burden of tax debt. Read on to know how you can go about doing this successfully.
1) Seek help of a tax agent: A professional tax agent or a trustworthy accountant can help you to take control of your tax problems. Do not worry about the fees that you will have to pay to your tax agent as it will be menial compared to the much larger debt accumulation and IRS penalty fees later on. The worst thing you can do is to wait for things to get out of control. Meet with a professional after organizing all your financial papers, tax documents, spending records etc. This will help you to get rid of your tax debt as fast as possible.
2) File for an extension: If you are facing trouble filing your (federal) tax forms on time, you can file for an extension. You, or your accountant, can file Form 4868: Application for Automatic Extension of Time To File U.S. Income Tax Return. This helps you to extend your time by six months to file your taxes. You should file for form 4868 by April 15th and you do not get extra time once your six month extension is over.
3) Set up a payment plan for your back taxes owed: Set up a payment plan with the IRS if you can’t pay your taxes in full this year or you still owe taxes from the previous year. But for this, you need to prove to the IRS that you will be unable to make your payments in full without experiencing economic hardship. Once you can meet this qualification, an affordable payment plan can be chalked out. This will satisfy both you and the tax collector.
4) Consider an Offer in Compromise (OIC): If you are unable to meet even the minimal fees of tax collectors, then you can go for an OIC. This is an agreement between you and the IRS that allows you to settle your tax debt by paying a one-time discounted settlement on the taxes that you owe. But the deal comes with a hitch; you need to sign an agreement which states that you promise to pay your taxes on time and in full for the next five years.
5) Submit a Penalty Abatement request to the IRS: If you can prove to the IRS that you have a valid reason for not paying your taxes on time, then a Penalty Abatement request can prevent the penalty fees from being imposed by the IRS for your unpaid tax debt. An accountant can help you draw up an accurate representation of your financial situation while submitting a Penalty Abatement request.
It is important to understand as much of the tax process as possible in order to take control of your tax debt. Prepare for your next year’s taxes from now to prevent your tax debt from snowballing. Take your accountant’s help, make quarterly tax payments ahead of time and create a budget which helps to keep little money aside each month to make your tax payments. These steps will surely help to keep your financial worries at bay!
Filed Under: Taxes