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Tax Debt Problems and Solutions

Posted by : Premraj | Posted on : Monday, March 3, 2014


When you are behind on your taxes there are plenty of issues that depend on a couple of factors. If you owe a little money you will accrue interest, and the longer you wait to pay it off the bigger it will get. If you owe a lot, the IRS can take serious measures against you like a levy or a lien. The best way to prevent tax issues is to stay organized, keep good records and pay your taxes. If you miss a tax deadline, don’t ignore it. The IRS will work with someone who is making an honest attempt to pay what they owe, but if you just ignore the issue you will rack up more debt and the IRS will take action against you. When that happens several issues can arise:


Liens are an IRS penalty for tax debt that occurs after a written notice is received. If you owe taxes and you fail to pay after a certain amount of days, a lien is placed on a piece of your property as collateral or security for the debt. Property with a lien on it can’t be sold until the title is cleared by paying off the debt. Liens on houses are common, but vehicles can also be claimed. Also, a lien can have a negative effect on things like your credit score. If you have one it is best to pay it off or deal with it as soon as possible.


Levies are the next step up from liens because they are arguably worse. Where a lien ensures that you pay off your own debt, a levy is when the government actually takes your property as payment for considerable debt that you refused or neglected to pay after a certain amount of time. Levies are placed on property only if you don’t pay what is owed after a “Notice and Demand for Payment” is sent. Then they will send a final notice. There are a few different ways a levy can take effect.

Property Seizure

When a large amount of debt goes unpaid, even after warnings and notifications from the IRS, the government can seize your property and sell it to satisfy the debt. In this case, everything you own is vulnerable to a levy including your house, car or boat.

Wage Garnishment

Levied property can also include your wages. If debt is not paid, the IRS can take a part of your paycheck in order to pay the debt. They can also levy bank accounts, retirement accounts, rental income or insurance.

Solving Debt

Even with all of these penalties there are ways to deal with tax debt. If you think you would have trouble dealing with any of the above issues, especially some of the more serious ones, you can get help from a tax professional. Levy & Associates is a tax consulting firm that specializes in levy and lien issues as well as many other tax related problems. Whether you take advantages of a tax help service or not, there are several ways to solve any specific tax problem. If you address a debt issue early, the IRS may be willing to work with you to get it paid off. Be sure to file your returns even if you can’t make the full payment. Pay as much as you can and give a reason as to why you cannot pay all of what you owe.

Installment Agreement

An installment agreement is a payment plan that you can file for if you are unable to make tax payments. This does come with some fees and interest but it also helps you show the IRS that you intend to make payments. An installment agreement can help you avoid any further penalties or action taken against you because of debt.

Penalty Abatement

If you receive a penalty because you failed to file a return or pay what you owe for the first time, you are able to get those penalties removed with a First Time Abatement. This is a one-time use for one of a taxpayer’s tax periods. You can also get penalties abated if you have a reasonable explanation as to why you missed a filing or a payment such as a medical condition, a natural disaster, theft or misinformation given to you by a tax professional.

Offer in Compromise

An offer in compromise is a debt settlement for tax debt. This means, if you cannot pay the full amount of tax debt you may be able to compromise and pay only part of the full amount. The IRS agrees to an offer in compromise based on their assessment of your ability to pay, income and expenses.

If you have any of these sort of tax issues, try looking into these solutions. If you are afraid that you might not be able to handle it on your own, seek professional tax help from a reputable source.

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