The New Year often brings with it the images of tax season. For some, this means a nice tax return and imagining how it might be spent. For others, this means a large tax debt and wondering how it will be paid off. When dealing with tax debt in this type of situation, it is often helpful to seek tax help. Many people have found accountants to be the best source of tax help, since tax laws and the Internal Revenue Service (IRS) forms are their specialties. The fees associated with hiring an accountant may prevent some people from seeking tax help.
However, accountants spend years studying various tax-related laws and are up-to-date on the latest developments in accounting, which could save the client money in the long run. Tax debt most commonly results when taxpayers do not withhold enough taxes from their paychecks. Doing this gives the taxpayer bigger paychecks throughout the year, but may cause taxes to be owed at the end of the year.
It is always a better idea to withhold more taxes during the year with the hope of receiving a tax refund, than to end up owing a lot of taxes on April 15th. People who are self employed often find themselves in need of tax help. They are not required to withhold taxes from their own paychecks, thus many times they do not. If this happens throughout the year, the amount of taxes they owe could be very high.
In situations like this, it may be a good idea to make quarterly interest payments to the government to help keep track of what is owed. Sometimes, people require tax help due to late payment of tax debt or because they didn't file on time. Federal tax forms are due by April 15 of every calendar year. Filing tax forms after this date means there will be a late fee.
There is a 4.5 percent fee for filing late and an additional point 5 percent fee for not paying the tax debt on time. This amounts to a total possible fee of 5 percent, which can continue to accrue until the tax debt is completely paid.
The late filing penalty will continue until it reaches a cap of 25 percent of the net amount initially owed. After five months, the delinquency fee continues accruing at the rate of point 5 percent. Thus, the penalty amounts could potentially be quite expensive. In the event that a person's tax debt exceeds their financial capabilities, tax help is available from the United States Government in a few different ways. The most sought after form of tax help is the Offer In Compromise.
This deal is very attractive to those who cannot pay their complete tax debt since it reduces the amount they owe. It is important to note that most people will not qualify for this program, as it is very selective and usually applied to those who are in desperate need of assistance. Other forms of tax help come by way of tax relief.
The government will work with taxpayers who are unable to pay their entire tax bill by the deadline. Taxpayers can do everything from filing an extension to setting up monthly payments. The IRS wants its money, so it is very willing to offer tax help to those who need and ask for it.
When incurring tax debt, the one thing that should never be done is to not make a payment at all. The penalties for nonpayment can be quite steep and could result in liens or levies being placed on the taxpayer's personal assets. Also, any late payment or nonpayment of a debt can negatively affect one's credit report.
Once a person's credit is determined to be "bad", it is extremely hard to repair. Having poor credit can prevent a person from receiving new loans in the future, which can make buying a home or new car very difficult. It is not uncommon to need tax help these days. Tax laws can be hard to understand, especially since they change frequently. Fortunately, tax help is available to all taxpayers either from online sources, through the IRS, or through tax accountants. For those who need additional tax help, the government offers tax relief programs and even tax-debt settlement in some cases.
Tax debt is never a pleasant thing to deal with, but having help, could make it a little more agreeable.
Bernard Pruett teaches about personal finances and taxes. If you are in need of a tax debt reduction or tax problem help on a current or past tax year, the folks at Secure Loan Consolidation will be able to help you. You may reprint this article with all links intact.