Tax Debt Relief - FAQ
What are the consequences of tax debt?
Tax debt is a problem which should be dealt with as soon as possible, because the amount of your tax liability can multiply in a relatively short period of time. Below are only some of the threats involved, the list is practically inexhaustible:
- income garnishment,
- statutory interest,
- persecution by the IRS,
- bank account levy,
- penalty fees.
How does the IRS collect debts?
The IRS is not an average creditor which manifests itself through highly effective methods of debt collection. These include enforcing wage garnishments and bank levies. Eventually you may feel the pinch and find it difficult to cover your basic expenses.
What is penalty abatement?
On some occasions the IRS agrees not to execute penalties for outstanding tax debt. However, an application for penalty abatement must be justified, that is the taxpayer should present a good reason why they've defaulted on tax payments. Penalty abatement applies only in a small number of cases, though.
What is wage garnishment?
It is the process of deducting one's salary in order to pay off tax debt. This is usually a last resort measure. The IRS issues a notice and informs both the taxpayer and their employer beforehand. The IRS is entitled to collect up to 80% of your wages.
How to deal with tax debt?
First of all, be proactive and take actions before things get out of hand. For instance, it is possible to negotiate with the IRS and agree on an instalment agreement, i.e. you make monthly payments previously agreed upon. Another solution is offer in compromise which is a way to settle your tax debt for less than what you owe. The IRS can also declare a taxpayer "currently not collectible," but only if the indebted taxpayer has no ability to pay whatsoever. Filing bankruptcy is a last resort option, it is a legal process whereby assets are liquidated in order to pay off tax debt. However complicated this may seem, EasyFinance.com will help you choose the best option for you.