Being in debt is never a fun experience, especially if you face the loss of your home or other assets. Many see the IRS as a threatening government agency due to their fear or anxiety over owing taxes. This collective fear over the IRS makes many ignore or hide from their federal tax debt, since they believe something horrible might happen to them, such as going to jail for tax evasion or losing their home.
Although there are serious consequences for owing the IRS money, the reality is not nearly as scary as the imaginative scenarios running through your head. If you owe any amount of money, especially more than $10,000, stop feeling worried. Don’t know how? The following might help you overcome your anxiety.
You Might Not Owe That Much
Believe it or not, you might not owe the amount of money for which the IRS billed you. There are several reasons for this. One of the most common is that you did not file your tax return. In these cases, the IRS submits what is known as a “substitute for return” or SFR. When they fill this out, they only use the information given to them from your employers, banks and other sources of income, such as your 1099s and W2s. Then, they give you the standard deduction and bill you for your outstanding taxes.
However, most people qualify for more credits and deductions than the standard amount. Plus, you might have other sources of income, expenditures or losses that affect your taxes. So, if you simply fill out and submit your tax return for all your back taxes, you might find that the amount you owe reduces by a lot. For some, it actually becomes a refund!
You Can Reduce Your Burden
Another reason not to be anxious about your overwhelming tax debt? You can actually reduce your burden! For those who did file a return, you still might not have to pay the full federal tax debt. There are several ways to reduce your federal tax debt. Perhaps you have a reasonable excuse for filing or paying late. Your debt goes up quickly due to penalties. With a Penalty Abatement, you can significantly reduce the amount you owe. Maybe you have undue financial hardship and will be unable to pay the amount owed. Then you can negotiate an Offer in Compromise. If you were audited and the IRS found a different number than you did, you could appeal the decision and have your numbers rechecked.
Even if you do not qualify for any of these tax relief settlement programs, you can apply for an Installment Agreement. These are generally easy to get. It basically sets up a monthly payment program that makes your tax debt more affordable. Rather than dealing with a wage garnishment where the IRS decides how much of your money to take out each month, you set up an amount that works with your budget. The IRS still charges penalty and interest fees, but generally at a lower rate than if you were to just avoid paying the tax entirely.
You Won’t Get Arrested
Just because you owe a huge tax debt does not mean that you will go to jail. Only in cases of fraud or tax evasion will the IRS pursue criminal charges. Otherwise, you simply face civil penalties, which means significant fines and the potential of lost assets. The IRS will try to get the monies owed to them, which means eventually they will put liens and levies against your accounts, including a possible wage garnishment. However, as you will see, this does not have to become a big deal.
You Have Rights and Protections
The IRS might be a huge government agency and debt collectors, but that does not mean that you are left with no rights. You actually have a ton of rights and protections when dealing with the IRS. In fact, there is a Taxpayer Bill of Rights, which includes 10 rights that you have, including:
- Right to be informed
- Right to quality service
- Right to pay no more than the correct amount of tax
- Right to challenge the IRS’s position and be heard
- Right to appeal an IRS decision in an independent forum
Do not feel as though you have to just sit back and let the IRS do what it wants. If you feel harassed by an agent, you can request another one. If you feel that your tax liability is not correct, you can discuss it with the IRS. There are many instances of taxpayers successfully appealing and challenging their taxes! Therefore, there is no reason to fear the taxman. They are actually on your side — even though they also are there to ensure that all taxpayers pay their fair share.
There Are People Ready to Help
You do not have to sit around anxiously worrying about what to do with your tax debt. There are people out there ready to help you: tax professionals who can look at your situation and determine whether you qualify for one of the federal tax relief options discussed above, such as Penalty Abatement, Installment Agreement, Offer in Compromise, or filing your back taxes. There are other programs as well, such as Currently Not Collectible or Innocent Spouse Relief. A tax professional works on your behalf with the IRS to negotiate your tax relief settlement and ensure that everything is handled appropriately so you remain in compliance. They are your advocates, fighting for you to ensure you get the best possible solution for your situation.
At Fidelity Tax Relief, our tax professionals are ready to advocate on your behalf to the IRS. We will review your tax debt and situation and determine the right course of action for you. Remember, you are not alone in this! There is help out there, and you do have actions you can take to get back in control of your debt and find relief. Call us today at 877-372-2520 to learn more and take the first steps towards tax relief.