Many Americans struggle with paying off tax debt and are still dealing with IRS back taxes. But what many may not realize is that there are ways to reduce or possibly even eliminate tax debt. For instance, you could get help with tax debt relief by negotiating with the IRS, applying for tax debt relief programs, or using legal options to alleviate tax debt.
No matter how much you earn, owing money to the IRS is enough to send anyone into a spiral. But don’t worry – this guide can help you learn about tax relief services and repayment options that may be available to you.
Filing your federal income tax return can be a complicated and often time-consuming process. Even simple tax returns can take hours, and if you’re self-employed or run a small business, you can get lost in a sea of confusing forms.
Dealing with IRS back taxes is not a unique situation. Plenty of people receive an unwelcome surprise during tax season. If you’re facing an overwhelming tax debt, it might help you to understand how it could’ve happened in the first place.
Here are some of the most common reasons people owe money to the IRS:
- Miscalculating how much you owe
- Filing your tax return incorrectly
- Missing the filing deadline (typically on or around April 15)
- Forgetting to file your tax return
- Not withholding enough taxes throughout the year
- Not paying enough in quarterly taxes as a self-employed person
The IRS is the government agency that verifies taxable income, collects taxes, and sends out payment notices to ensure every eligible American pays their share. But if you don’t file or pay enough in taxes over multiple years, you can accrue large amounts of tax debt and fees.
Plus, the IRS adds daily interest to the amount of money you owe. The longer it takes for you to pay it off, the more you wind up owing in the long run.
There are a variety of tax relief services that could be available to you based on your current tax debt status. This status is a representation of where you are in the repayment process. There are six categories of tax debt statuses determined by the IRS:
- Liable: This is when you owe taxes but haven’t been notified of having debt.
- First notice: This is when the IRS has sent a letter telling you that you have unpaid back taxes.
- Multiple notices: The IRS will contact you multiple times through different means to notify you of your tax debt.
- Payment plan available: The IRS may notify you that a payment plan is available, which is one of the IRS debt relief help programs you can choose.
- Collections: This is when the IRS sends your tax debt to collections, and the collections agency begins deducting payments from your paycheck, future tax refunds, or other government payments.
- Serious delinquency: The government could revoke your passport if your tax debt reaches $50,000 or more.
You often have more back tax help options when you take action to resolve your tax debt as soon as possible. But if you need help with tax debt that has accrued for multiple months or years, you still have many options.