Taxes are a huge expense each year, and especially for those whose tax payments are not taken out of their paychecks automatically, paying your taxes can be a confusing and complex experience. What’s more, it could be easy to do it incorrectly, and then find out later that you owe tax money you didn’t know about. Or, maybe you didn’t file your taxes because of financial hardship, and now you are in even more debt than you were before.
Basically, owing taxes can sometimes surprise consumers and catch them unprepared, so that when the time comes to pay taxes you cannot afford to pay back everything that is owed. People working paycheck to paycheck often do not have money to put aside for possible tax debts every year. Self-employed workers, especially those just starting out in a new business venture, sometimes do not understand how tax laws apply to their earnings.
Owing taxes is common in America and the IRS takes a serious approach to repayment of all debts owed. In fact, strict penalties including fines and even incarceration are possible if you fail to make your tax debt payments.
Penalties and fines only serve to increase your debt and financial burdens, so it is important to make sure your taxes are paid as needed. Tax debt relief is possible, however, and it is equally important to understand the options available to you today.
Back taxes and other tax debts are expected to be paid immediately and in full. A 0.5 percent late fee is assessed to your debt each month you fail to pay what you owe. The fee also increases by 0.5 percent each subsequent month if you fail to meet your payment obligations, which compounds upon your debt up to a maximum of twenty-five percent.
Late fees, penalties and interest are all charged separately, which is why expediting a payment plan arrangement with the IRS is vital.
Negotiating with the IRS seems like an intimidating process but is far easier than one might think – and necessary to do in certain situations. If you can prove you cannot pay your text debt in full the IRS creates a payment plan for what you owe.
Interest still accrue each month until your debt is paid in full, and payments must be made on time. The best debt relief companies assist you with negotiating IRS payment plans when your tax debt situation is complicated, but for smaller amounts it is quite possible to arrange these plans yourself.