There are two people you should never owe money to, your mother-in-law and Uncle Sam. We’ll discuss family debt in a different post, but if you owe taxes to the IRS, you must make it a top priority to pay them back. The IRS has the power to impose hefty fines and garnish your wages if you don’t act. For people who owe more than $10,000 in taxes, I would recommend working with a tax debt relief agency.
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How To Resolve IRS Tax Debt?
Owing money to the IRS can be very intimidating. That’s how Luz, one of my blog readers, said she felt when she reached out about her tax debt.
This is a fragment of her email to me:
Hello Yezmin, I want financial peace. Right now, I owe money on two cars and $10,000 to the IRS. Can you believe it? How did we get there? I don’t know!
Owing money to the IRS is probably one of the worst financial situations you can be in. This government agency is like Big Brother, powerful, and watching over your assets. Besides having to pay penalties and interest on your debt, you are at risk of having your assets garnished or seized if you don’t pay your taxes.
So, to help you stop losing sleep over your tax debt, in this article, I will address:
- Why people fall behind on taxes
- How to access your IRS tax account
- Options if you cannot pay your tax debt in full
- The consequences of ignoring an IRS tax debt
- And, tax debt relief options
Falling Behind On Your Taxes
Every year workers in the United States have the responsibility to file taxes with the Internal Revenue Service, better known as the IRS. Falling behind on your taxes is never a good idea, and it has serious financial consequences. You could be subject to fines, interest, and in the worst-case scenario, have your assets garnished or seized. In other words, you could end up on the streets if you disregard your tax debt.
Most employers have federal and state taxes automatically taken out of their employees’ paychecks. But depending on factors such as income, marital status, and dependents, you could be paying too much or too little in taxes.
When you pay too much throughout the year, you get a tax refund after filing. And when you pay too little, you end up owing taxes. Often times, it is business owners, freelancers, or self-employed people who end up owing money to the IRS. Usually, they underpay taxes throughout the year.
Whichever the case is, you must take immediate action to resolve your IRS debt.
Accessing Your IRS Tax Account
You should never ignore a debt to the IRS. If you are receiving notification letters from this government agency, you need to act immediately!
If you don’t know exactly how much you owe, you can view your IRS tax account online. Obtain information such as your payoff amounts, debt balance for each tax year, and payment history.
If you don’t pay your taxes on time and in full, you will start getting notifications via snail mail. According to the IRS, those bills start the collections process. They will include information such as the total amount owed, penalties, and interest that will be accrued.
You want to open those letters right away and take them seriously; otherwise, the amount you owe can snowball quickly. Unpaid balances are subject to interest rates that compound daily. You could incur monthly late payment penalties and fees. The combination of accrued interest and fees can inflate your original debt balance quickly.
What If I Cannot Pay Off My IRS Debt In Full?
If you cannot afford today to pay your tax debt in full, you have some options. But like I said earlier, you need to be proactive.
Set Up A Payment Plan
Individuals and businesses may be eligible to set up a payment plan. Depending on your situation, you could qualify for a short-term or long-term payment plan. Some arrangements incur a set-up fee plus accrued penalties and interest until the balance is paid in full.
https://www.irs.gov/payments/online-payment-agreement-application
Get An Extension To File
Some taxpayers can apply for an extension to file their taxes. But even if the extension is granted, the debt will generate interest and penalties until it is paid in full.
Request An Offer In Compromise
In other cases, taxpayers may qualify to make an agreement with the IRS to settle the debt for less than it’s owed. This is called an offer in compromise. You can fill out the IRS’s pre-qualifier questionnaire to find out if this is an option for you.
What If You Ignore Your IRS Debt?
The one thing that you should never do is ignore an IRS bill. This government agency has the power to:
- Garnish your income, bank accounts, social security, and retirement benefits.
- Impose a lien on your property.
- Seize your property like your car, your home, and real estate to satisfy the debt.
- Garnish future state or federal tax refunds.
It’s imperative to know that, in some cases, the IRS has the power to levy (seize) your property. That means that they can garnish your assets without first getting a court judgment like other creditors would have to do.
So, NEVER ignore a bill from the IRS. And, if you get a letter titled Final Notice of Intent to Levy and Notice of Your Right to A Hearing, you must contact the IRS right away. Otherwise, you risk losing your assets.
Tax Debt Relief Options
Dealing with the IRS can certainly be intimidating, especially if you are behind on your taxes. However, your first line of defense should always be to contact the agency directly.
Taxpayer Advocate Service (TAS)
Know that if you don’t feel like you are getting the answers you need, you have the option to contact the Taxpayer Advocate Service (TAS). This is an independent organization within the IRS which function is to protect your rights as a taxpayer.
You can contact TAS to address any tax issues that you might not have been able to solve on your own, working directly with the IRS.
TAS is also an excellent resource to know your options if you cannot pay off your tax debt. You can contact one of their local offices to figure out if this could be a resource in your specific circumstances.
Tax Debt Relief Services
A tax debt relief service can be a good option, especially for taxpayers that owe $10,000 or more to the IRS. These agencies act as a bridge between the taxpayer and the IRS to negotiate and help resolve the debt.
I am always skeptical of organizations that offer to negotiate debt on behalf of consumers. I have found that many debt consolidation services are a total waste of time and money. However, while researching tax debt relief services, I found one that I feel very comfortable recommending.
In full disclosure, Community Tax is one of our business partners. We may get paid a commission if you contact them through our affiliate links included in this article.
Community Tax Relief Services
Community Tax is an organization that helps consumers deal with their IRS debt. They have a team of lawyers, public accountants, and tax preparers that help clients investigate their tax debt and come up with options to resolve it.
In my opinion, consumers have nothing to lose by contacting Community Tax. They offer a free consultation to learn more about each individual case and determine if they are a good fit to work with you.
When I reached out to learn more about their services, I was very pleased with their customer experience. Not only that, because I was writing this article and wanted to get the best insight into how they work, they also put me in touch with the owner himself. How about that!
How Does Community Tax Relief Service Work?
As a personal finance journalist, I must share resources with you that are consistent with my teachings and beliefs. For instance, as a debt-free advocate, I don’t write articles about the best credit cards to use or best debt consolidation agencies. I don’t believe in using credit cards, and I don’t believe in debt consolidation services.
So, it was crucial for me to understand the behind the scenes of how Community Tax works, to make sure this is a service that aligns with my teachings. Jacob Dayan, president, and co-founder of Community Tax, agreed to jump on a call to explain to me how their services work.
Community Tax’s Debt Relief 3-Step Process
1.- Protection
The process begins when a consumer gets in touch with Community Tax through their website or by calling 844-232-3080 for a free consultation. After hearing your case, an experienced professional will provide the consumer with free tax analysis and the best resolution options for their tax debt.
The focus of Community tax is to protect customers’ rights, assets, and peace of mind.
2.- Investigation
The second step of the process focuses on gathering information. Community Tax will file on your behalf Tax Authorization Information Form 8821 with the IRS and/or your state tax department. They are looking to get a complete record of your tax account.
Once they obtain all the available information, they will get in touch with customers to discuss options available to resolve your tax debt.
3.- Resolution
The third step focuses on finding a resolution. They will gather in-depth financial information and documentation on your situation to prepare a proposal to submit the IRS or your state tax agency.
In many cases, the resolution phase will require a lot of back and forth with the IRS or your state. The end goal is not only to help you resolve your tax debt but also to keep you tax debt-free in the future. That is music to my ears!
Fees And Costs Associated With Community Tax Debt Relief Services
Although Community Tax offers a free initial consultation, working with them to resolve your debt has a cost. Fees depend on the complexity of each case.
According to Dayan, clients can expect total transparency on the cost of their services. For instance, in some cases, fees for tax debt relief can reach $500. The price can be lower or higher, everything depends on the particulars of each case.
Besides paying fees to Community Tax, customers have to comply with their payment plans as arranged with the IRS.
I should note that Community Tax’s debt relief services are not a good fit in every case. This service will work best for people who owe more than $10,000 in taxes. If you owe less, I would recommend that you try to resolve your debt by working directly with the IRS.
But regardless of the fees, I believe that if you owe more than $10,000 in taxes, working with an agency like Community Tax can save you a lot of money.
I know this because I recently heard from another blog reader, Blanca Portillo, who wanted to thank me for recommending Community Tax. She had a $57,000 debt with the IRS and was able to settle it for $5,000 with Community Tax’s help.
Why I Like Community Tax’s Debt Relief Program
There are three things I particularly like about Community Tax.
First, they provide professional guidance and options on how to resolve IRS debt. The keyword here is RESOLVE. You know that I am a huge fan of personal accountability to get out of debt.
Second, they allow you to pay extra towards your debt to pay it off faster. Being able to pay extra on your debt is a crucial factor for me in recommending Community Tax.
Paying extra on your IRS debt is something you should look for when working with any tax relief agency as well. I want you to be debt-free as soon as possible, and not to be stuck on a payment plan forever and ever.
Third, Community Tax is accredited by the Better Business Bureau (BBB) and offers a 100% money-back guarantee. If you don’t like their services, you can request a full refund within 14 days. There is really nothing to lose if you want to give this service a try.
In Conclusion: Tax Debt Relief
If you have an IRS debt, you need to act immediately to get it resolved. Keep in mind that this government agency has superpowers. The IRS can garnish your wages, impose liens in your property, and seize your assets for the sake of settling the debt.
When you get an IRS collection letter, you need to follow instructions to contact them ASAP. Try to pay as much as you can towards the debt. Then, look at the options that you may have to get on a short or long-term payment plan working directly with them.
If you owe over $10,000 in taxes, and you feel intimidated working with the IRS, consider a tax debt relief service. After researching the options available, I am confident recommending to my readers Community Tax.
Community Tax offers a simple three-step process to help taxpayers resolve their debt. They focus on gathering factual information, protecting taxpayer’s assets, and provide complete transparency about the process and their fees.
Whichever way you decide to go, make sure that you never ignore a letter, bill, or collection notice coming from the IRS.
And if you work with Community Tax to resolve your debt, I would love to get your feedback! Make sure to write about your experience in the comments section below. Your input, like that of Portillo, who saved $52,000 working with Community Tax, can be valuable for other readers who are looking for options to resolve their tax debt.
Related Articles To Paying Off Debt:
- How To Pay Off Credit Card Debt For Good
- The Debt-Freedom Challenge
- $5,000 Paid Off in Credit Card Debt by Going Cash-Only
- The Debt Snowball Method
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