Thursday 27 April 2023

5 Ways to Deal With Taxes and IRS

As much as you hate paying taxes, it’s something you can’t escape from. IRS aggressively pursues anyone who owes the government money, and they’ll come knocking at your door sooner than later. 

According to the organization, they had 14 million open cases in 2018 alone. The most concerning piece of information is they’ve increased the number of cases against taxpayers with incomes below $25,000. In other words, the fact that you don’t earn much doesn’t save you from this notorious agency.

Still, it's not the end of the world, even if you owe a lot of money to the government. There are ways you can tackle the problem, reduce the tax liability and stay away from jail. In this article, we talk about 5 ways to deal with the IRS and come out on top.

1. Address the issue 

The worst thing you can do is let the problem simmer. As we’ve just mentioned, IRS has been more aggressive in the last few years, increasing the number of cases against both high and low earners. 

Whatever the case, you should report your earning at the agency. Even if you’re unable to pay your taxes, you should at least look for an extension. Otherwise, you’ll have to tackle penalties for late filing, which can go all the way to 25%. 

Aside from late filing, you also need to pay attention to underpayments. Trying to bamboozle IRS will come back to bite you, and you'll have to deal with a similar penalty that goes up to 25%. In fact, most people are shocked by how quickly their taxes rise.

2. Use financial misfortune

If you're a rich person who just wants to make a profit off of the government, you're in for a rough ride. However, if you're suffering a true financial misfortune, IRS might give you a helping hand.

Taxpayers have the option of filling out Form 656. By submitting this document, there's a chance the IRS will write off a part of your debt (presuming financial struggles). High healthcare expenses, low income, and diminished job opportunities are just a few things that can make you eligible. 

Still, IRS rarely forgives debts. So, while you can apply for a reduction, we suggest that you don’t get your hopes up.

3. Hire an attorney

The potential punishment increases with the debt. As mentioned, it isn’t uncommon for people owing big bucks to end up in prison. Whatever the case might be, we suggest you hire a tax relief attorney for any debts above $10,000. 

These professionals know how to negotiate with the agency. They might not get you off the hook for payment, but they might help you stay away from jail. Furthermore, a savvy attorney can help reprogram the debt making the payment more feasible. 

Another benefit of tax attorneys is that they can help you avoid a tax lien. That way, you can settle the score with IRS without suffering any damage to your credit score.

4. Settle minor debt

If your debt is below $10,000, you don’t even have to hire a lawyer. Instead, we suggest you head out to the nearby IRS office and settle the case yourself. In these situations, hiring a lawyer is usually counterproductive as it might cost you more than you can save. 

A taxpayer can access Form 9465 online. This is a document that allows you to pay off your taxes in installments. The specialists will take a look at your case and create a plan that will make it easier to settle the debt. 

Keep in mind you can only use this form if you owe less than $10,000. Applying for a plan allows you to stretch the payment over 36 months, during which you'll need to pay off the basis plus interest and penalties.

5. Streamlined agreement

Ideally, you should be gunning for a streamlined installment agreement. This is a type of settlement geared toward larger debts. You can apply to a streamlined agreement if you owe the government up to $100,000. 

A taxpayer needs to file for previous tax returns and shouldn't be a part of any other IRS payment plan in the last five years. A streamlined agreement also doesn't work if you're in the process of bankruptcy. 

If you're able to close this agreement, you can gain some major benefits. For example, IRS might stretch your payment over 84 months. With a waiver, it might go even longer. And if you agree to payroll deduction or direct debit plan, the IRS won’t use tax lied. 




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