We’re used to getting a tax return year after year, especially if we are careful about how we manage our taxes. For most people, a tax refund is something to be expected. The recent change in the tax code, however, reduced tax refunds for a lot of people, and that’s not even the worst part.
One thing worse than not getting a tax refund is seeing a substantial amount in back taxes in the mail. A tax bill that is well beyond what you can afford to pay can wreak havoc on your personal finances. It is a tricky situation to manage regardless of how you see it.
The latter is what we will try to solve in this article. Yes, receiving a surprise tax bill is not pleasant, but that doesn’t mean you can’t do something about it. Taking the right steps to deal with the issue can help make owing taxes a more manageable problem.
You Are Not Alone
According to the latest survey, more than 20% of people in the country owe the government taxes. The number is growing too, especially with the new tax law putting more of a burden on mid-income families. Tax returns are critical in many households, so getting a tax bill instead is incredibly devastating.
Knowing that you are not alone in facing this kind of financial problem helps. At the very least, you know you can learn from the experience of others and figure out ways to start dealing with the issue. More importantly, you can avoid making unnecessary mistakes along the way.
This is also not a financial problem you want to face on your own. Speak to your partner, discuss the issue with your parents or close friends, and make sure you have the support network you need to get through this. Getting loved ones involved is a good thing, because you have more people going through the issue and helping you find a solution.
Consider a Payment Plan
The IRS offers a number of options when it comes to settling your tax debt, the first one being offering you a payment plan that makes repaying your back taxes easier. This is the first option to look into the moment you realize that you owe the IRS money, and there are two good reasons for that.
First of all, being more engaged in solving the tax problem is a way to show that you are being responsible with your taxes and personal finances. Making the first step and seeking a more manageable payment plan will help you stay on the good side of the IRS, figuratively speaking.
The second reason is the payment plans themselves. The sooner you act, the easier it will be to avoid unnecessary penalties, high interest, and extra fees. These extra charges add up, especially when the amount you owe in taxes is substantial.
You can choose between short-term and long-term plans, and work with the IRS to configure the plan to better suit your specific needs. As long as you can make the monthly payment, all you need to do to settle your tax bill is stick with the payment plan.
Seek Tax Relief
Tax debt can be dangerous when not approached or handled correctly. The IRS can take your assets or put a lien on your bank accounts if you don’t pay your taxes; these are the kind of things you want to avoid, mainly because they trigger bigger problems in the future.
If you really have no ability to pay your tax debt immediately, the IRS offers a number of tax relief programs to help those in trouble. There are ways to settle your tax debt using programs like Bank Levy Release and Offer In Compromise. These programs are geared towards different purposes, but they are incredibly useful, regardless of your situation.
The trick here is knowing which programs to use in order to solve your tax problems quickly and effectively. Getting professional help when making this decision – and following through with the tax relief application – is very valuable. Here’s the good news: there are tax relief companies ready to help you. This site has a list of the top five tax relief companies you can contact for help.
Enlisting the help of tax relief companies will make dealing with tax debts of $7,000 or more easier. The large amount should not scare you, because a team of experts will guide you through the process of getting a tax relief through various programs offered by the IRS. Even better, you can save money and avoid penalties with the help of tax experts.
Ask for Temporary Delay
If you think the previous two options are not for you – and you have no ability to pay your tax debt at all – then you can ask for a temporary delay in collection. This is a last resort for many, but it is a solution worth considering in the direst situation.
As the name suggests, what you are asking is basically a delay in collection. The IRS will review your ability to pay, and then grant you a delay if your inability to pay is confirmed. This is an option to consider if you are struggling to make ends meet or to pay for essential expenses like food and housing.
Keep in mind that the delay will not stop the IRS from charging interest and other fees against your tax debt. A waiver is something that must be negotiated separately. You can show goodwill by continuing to communicate with the IRS regarding your tax debt after collection is delayed.
The one thing you don’t want to do when slapped with a tax bill is take out a loan to pay your tax debt, especially when it is a high-interest loan like a credit card. You are adding more risk and putting your personal financial state in bigger jeopardy by going this route.
Consider the options we reviewed in this article carefully, think about your financial future, and decide on a way to deal with owed taxes carefully. Get professional help if you are not sure about how to deal with a huge tax bill correctly.