How to manage overwhelming tax debt
As the New Year begins, you may be checking the mail or logging into your work account to see your W-2 forms so that you can begin to estimate your taxes. Maybe you already know, without bothering to calculate, that again this year you will be adding even more debt to what you already owe the government.
If you fear the tax season because of unresolved delinquencies or the knowledge that you will owe even more after this year’s filing, you are not alone. Recent data reveals these statistics:
- Almost 8 percent of all federal income tax returns are delinquent.
- U.S. residents owe over $120 billion dollars in federal tax debt, including penalties and interest.
- The typical delinquent taxpayer owes an average of over $10,400 in federal taxes, fees and interest.
Avoiding the issue will only make it worse. The best advice is to face the debt head-on.
Facing the problem
Tax counselors advise people to file their returns even if they can’t pay what they owe. The fine for filing late is actually higher than the penalties for paying late. You should file and pay whatever you can to reduce the amount that will accrue interest.
You can also contact the IRS and ask for a payment plan. The IRS will set up monthly installments and even withdraw the amount directly from your bank account for a fee. You will still pay interest each month, but your good faith will help you avoid more serious penalties.
What can the IRS do if you are behind on your taxes?
The worst thing you can do is avoid the problem. Federal tax delinquencies may lead to serious life complications. In addition to the fees and penalties that accumulate month after month, the government may:
- Seize your personal property
- Seize your business properties
- Garnish your wages
- Freeze your bank account and claim the funds you deposit there
- Ask your family, friends, neighbors and co-workers about your finances
If you have exhausted every possibility, or the situation simply overwhelms you, speaking with a lawyer with extensive experience in negotiating with the IRS may provide you with guidance for taking the next step. People in Nevada have many options available for dealing with federal tax debt. An attorney can work to protect your assets and your good name, as well as your rights as a taxpayer.