You buckle at the knees every time someone knocks at your door because you’re afraid your mean old “Uncle Sam” is going to send the authorities over to haul you away. The penalty for not paying your past due taxes can range from a minor wrist-slap to wage garnishments to bank account seizures to time in the slammer. If you owe thousands in back taxes and haven’t made any effort to pay them,you may want to rethink your plan:
How to Handle Back Tax Issues
Burying your head in the mud isn’t going to make your tax problems disappear. As long as you owe the IRS money, you’re going to be looking over your shoulder wondering when they’re going to catch up with you. Save yourself the drama and handle your past due tax bill the right way.
Make payment arrangements
Contact the IRS and see if they will create a payment plan that works with your budget. If you show the Internal Revenue Service you want to pay your taxes and are willing to follow through on making regular payments, they will usually work with you. If you set up a payment arrangement and for some reason can’t keep up with your payments, contact the IRS and see if they can adjust them.
Get a tax lawyer
If you’re in deep stuff and need help digging your way out, call in the big-guns. A tax attorney can give you advice and help you come up with a solution to solve your tax issues. Your lawyer might work with the IRS to lower the payoff amount, or she might find other legal options that work.
See if the debt can be discharged
If you truly can’t afford to pay your past due taxes, see if you qualify to have the debt discharged. If the tax debt is more than three years old, you may not have to pay. Tax laws change often, so check the current laws to see what the requirements are to have your past due taxes discharged.
File for bankruptcy
Going bankrupt is not something you do just for the fun of it. This should be used as an absolute last resort. Going this route will stop wage garnishments and under the right circumstances, make back taxes disappear. Just know this. Creditors snub their noses at people who go this route. If you intend to buy a home or apply for loans anytime soon, you might want to reconsider bankruptcy and consider settling your bill another way.
Even if you can’t afford to pay your taxes, it is important that you file the paperwork on time. Once you send in the paperwork, make every effort to settle the past due tax debt as soon as possible. If you ignore the notices, you’re going to force Uncle Sam to hit you with fines, garnishments, penalties and possibly jail time.