Falling behind on income taxes can happen slowly. People who fall short of their total tax obligations may carry a debt that slowly accrues interest and penalties over time. In other cases, mistakes come to light all at once, leading to a sudden and shocking amount of tax debt.
The Internal Revenue Service (IRS) is often very assertive about collecting what a person owes. If a taxpayer owes more in past-due taxes, penalties and interest than they can pay, they may worry about escalating financial hardship and more aggressive collection efforts.
How can those who cannot repay their tax debts immediately address this matter to avoid more serious financial and legal consequences?
Proposing a settlement
While the IRS can be quite aggressive about collecting tax debts, the organization is also realistic regarding collection activities. In cases where people truly lack the resources for income to pay what they owe, the IRS may be willing to work with them.
People with tax debts can propose offers in compromise. An offer in compromise could involve a lump-sum payment for less than the full amount of the total tax debt. It could also involve a series of structured payments intended to pay off the tax debt over time. Provided that the offer is reasonable, the taxpayer may be able to take control of their finances and avoid more aggressive collection tactics, including wage garnishment or liens and levies against their assets.
Reviewing an income tax controversy with a lawyer can be beneficial for those feeling anxious about their income tax obligations. Taxpayers who cannot pay everything they owe all at once may be able to settle their debt or arrange for a reasonable payment plan with the IRS.