“Taxes are what we pay for civilized society”-Oliver Wendell Holmes, Jr.
Meeting your tax obligations is not always easy but do you know that failure to make timely payment on your tax bill will potentially increase your balance due? Every missed payment accrues additional interest, with rates as high as 8% (changes quarterly) and penalties, causing further hardship to paying off that debt. (https://www.irs.gov/payments/quarterly-interest-rates)
There are some instances where penalties can be waived, if the taxpayer can show reasonable cause. Currently, the penalty charge for each month or part of a month that it goes unpaid is 5%. This can be up to a maximum of 25%. Interest on the other hand, by law, can only be reduced or be removed if the same action is taken with the penalty.
Learn more about #penalty relief options by visiting the IRS’s website. https://www.irs.gov/payments/penalty-relief
So, what happens if you ignore the tax bill altogether? Well, the government can take several steps to collect that debt and that can create a whole lot of problems for you. From levying your bank account to seizing your assets, they will explore every possible means. If you need to apply for a loan or start any form of business venture, that tax liability can certainly have a negative impact on your credit worthiness.
Common Causes Leading To Tax Problems
- Not paying sufficient income taxes through withholding as an employee.
- Failure to file income tax returns for several years resulting in taxes owed.
- Failure to pay quarterly estimated taxes on self-employment.
- Earning income as an independent contractor and failing to pay income taxes.
- Failure to remit to the IRS/State, employee withholdings from payroll deductions.
- Failure to disclose and pay taxes on reportable earnings on your tax returns.
- Claiming fraudulent credits and deductions on your tax returns.
- Accrual of additional interest and penalties from ignoring the initial tax notice.
I have spoken to individuals and have helped them to resolve their tax problem. What I have observed is that the delay in acting promptly tends to complicate things further and it cause one to miss out on some mitigation options. It may surprise many to know that sometimes the notice is just a request for additional information, or they are notifying the taxpayer of an action taken.
If you do not agree with the findings of the IRS, or you are unsure of what is being communicated in the notice, you want to get clarification as soon as possible. Generally, the Taxpayer Advocate Service (TAS) can be contacted and a number to call them should be on the notice. Keep in mind that some of the notices are computer generated. Notices will either have a CP or LTR number on the right corner of it.
When the word taxes gets mentioned, for some reason it triggers an emotion of annoyance by most people. Even though many find the collection of taxes to be burdensome, the truth is, we are not getting away from it. Embracing that fact and complying with the tax system is well advised.
Taking The Following Actions Can Help To Avoid A Tax Liability
- Do your best to file an accurate tax return.
- File your tax returns on time when required to do so.
- Pay any taxes owed by the due date, in full, if possible
- Ensure sufficient withholdings are made through payroll deductions
- If necessary, make quarterly estimated tax payments.
Now, if you ever find yourself in the unfortunate position of owing taxes, please know that there as options for you. It may not be as bad as it seems but what really matters is how prompt your response to the notice is. Most important of all, take the time to read and understand the tax bill. Believe it or not, there are options available to get the matter resolved.
Too many Americans are dealing with the nightmare of owing taxes. Imagine worrying whether or not your paycheck will be garnished or even worse, losing your home. When the government puts a tax lien on your assets, it means that they are serious. Let me also mention that it can be very costly to have a tax problem resolved. In closing, don’t get caught in that tax trap. Pay your taxes.
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