Tax debts owed to IRS should not be ignored by taxpayers
Although 66 million people got tax refunds in 2013, some 14 million people owed money. The main message was stated on this blog previously — even if a person can’t afford to pay what he owes, he must file returns. Then, if the amount is not duly paid, the IRS will use various collection procedures to recover what will be an amount now inflated by penalties and interest. Those collection procedures apply in Nevada and all states.
The agency will use future refunds to offset what the taxpayer owes. It will also file a tax lien against the taxpayer. That stands as notice that there is a lien against the individual’s real and personal property. The next and more drastic procedure is the tax levy. The IRS issues bank levies to seize a person’s bank accounts and a wage levy to garnish a certain percentage of wages earned.
Obviously, the beleaguered taxpayer will do best to settle tax debts, either by a payment plan or by otherwise raising the funds. Credit cards, generally with humongous interest, are one option. A home equity loan has much smaller rates. Notably, for older Americans a reverse mortgage may be an ideal remedy because the funds are taken from the home’s equity and do not have to be repaid.
The factors must be weighed, however, and if the IRS has already filed a tax lien, it will prevent a home equity loan. There is a procedure to get the IRS to release the lien in return for payment to the agency. An individual would do best in some of these more complicated situations to obtain a tax attorney to negotiate and coordinate the final resolution of the matter.
The agency may approve the individual for one of its own programs. One is an installment agreement and the other is the offer in compromise. Whether you live in Nevada or elsewhere, the offer in compromise is more advantageous in that the IRS will accept less than is owed for those with hardship situations. Once more, the main message made by most experts is — don’t ignore the problem, find a way to pay the debt and put it to rest.
Source: mainstreet.com, The IRS Can Seize Your Salary or File a Federal Tax Lien Against Your Property, Ellen Chang, March 5, 2014
