The IRS requires each taxpayer to remit the taxes they owe before the provided deadline. If you do not send the whole amount, the debt accumulates with an interest of 1.5% each month up to 25%. Besides, your account becomes delinquent, implying that you now owe the IRS and are subject to debt collection.
If you have delinquent taxes, it is crucial to clear them to avoid getting in trouble with the IRS. This measure also stops the penalties from accumulating, saving you from repaying a hefty amount.
Here, we provide more details about delinquent taxes and the best ways to deal with them. We will also discuss the precautions you can take to avoid owing the IRS in the future.
What Happens When I Have Delinquent Taxes?
Once the deadline for paying taxes passes, the IRS will start the collection process. The first step they will take is sending a notice to your mailing address.
This document states the amount due and the consequences you may face if you do not pay. It also indicates how much the penalties and fines will accumulate until you clear the balance.
It is vital to contact the IRS after receiving the notice to develop a payment plan. If you do not do this, they may take various debt collection actions.
For example, the IRS can freeze all your bank accounts and assets. Besides, they may file a federal tax lien, affecting your ability to get financial credit.
How to Handle Delinquent Taxes
The best way to deal with delinquent taxes is by responding to the notice sent by the IRS in time. If possible, pay the total amount you owe and update your filing documents. In case you cannot repay in full, it is advisable to consult a tax liability professional.
With their help, you can determine the most suitable installment program based on your financial situation and the amount you owe. Further, it will be easier to negotiate with the IRS for an installment payment program.
Repaying Delinquent Taxes
The IRS offers various programs to help you pay delinquent taxes. These include an installment agreement, offer in compromise, and currently not collectible. The installment agreement plan allows you to repay debts that are equal to or less than $50,000. In most cases, the IRS will give you 72 months to clear the total amount.
Offer in compromise is a tax relief program that allows you to pay less than what you owe. Still, you will need to remit an agreed lump sum amount and then pay the balance over a specified duration.
When facing financial hardships, you may not be in a position to pay your tax debt. In such a case, the IRS can declare your account currently not collectible to stop recovery attempts. To qualify for this relief program, you must show that paying your debt will cause severe hardship.
How to Avoid Delinquent Taxes
Delinquent taxes often result from minor calculation errors and failing to provide correct information. Hence, it is essential to double-check all figures when filling your forms. Alternatively, use the IRS online system to avoid miscalculations or hire an expert to file your taxes.
More strategies to prevent a tax debt are:
- Filing under the correct status
- Reporting all your income
- Reviewing all your details before submitting tax forms
Another way to avoid delinquent taxes is by ensuring you remit the total amount owed by the due date. Further, understand all the taxes that apply to your filing status to ensure you pay the correct amount.
Get Professional Help to Deal with Delinquent Taxes
Handing delinquent taxes without the help of an expert can be challenging. At Tax Industry, we provide reliable tax resolution services. Our experienced attorneys and CPAs can help you qualify for a repayment program by providing all the needed documentation. Reach out to us now to book a consultation appointment and resolve your tax liability.