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3 approaches to resolving tax debts

On Behalf of | Mar 15, 2018 | Back Taxes or Tax Debt |

Tax season does not always result in federal tax refunds for people in Maryland. A variety of reasons could cause someone to owe taxes at the end of the year and face challenges in coming up with the money for the Internal Revenue Service. According to the IRS, tax penalties hit roughly 10 million people every year. A tax bill cannot be ignored, but people sometimes have options for gaining more time to pay or negotiate a settlement.

For people who owe less than $50,000, a long-term payment plan could provide relief. The IRS will continue to apply interest and penalties to the balance, but installment payments grant people a method for meeting their obligations when they cannot raise the money within 120 days. The tax agency might also respond favorably to requests to delay payment from people who can show that paying the bill will impose serious financial hardship.

Another option known as an offer in compromise also relies on demonstrating an inability to meet daily living expenses. Under this arrangement, a person might resolve the tax debt with a settlement for less than the original amount.

People should not give into fears about owing taxes and avoid filing their tax returns. At some point, ignoring tax obligations could reach into the realm of criminality. Accountants and attorneys may provide advice that helps someone make a realistic plan for settling back taxes or tax debt. Legal representation may allow a person to understand their rights when dealing with tax officials. An attorney may also help interpret tax notices for the individual and recommend how to respond. By communicating directly with the tax agency, an attorney might gain the person time to file or amend tax returns and make arrangements for payments to prevent wage garnishments or property liens.