USA's 10 Best Tax Relief Companies

Owing money to the IRS is not something that you want to go through in this lifetime. However, there are times when you simply cannot find the necessary resources to pay your due amount or something unexpected happens that turn your world upside down. In a perfect world, you shouldn’t wait until you are late on your taxes because paying your due amount gradually should not get you in this situation. It should be common knowledge that as an employee, your taxes are withheld from your salary on a monthly basis while as a self-employed individual, you pay them quarterly to the IRS.

But what actually happens if you owe the IRS taxes? Well, in this article, we will be talking about the different situations that could get you in this situation. We will also be detailing come of the outcomes of not paying your taxes and what you can do to get some help in this case. Keep reading!

What occurs when you file your taxes late or don’t file at all?

The best thing that you can do is to file your taxes before the deadline. If you cannot do this, you should ask for a filing extension through the completion of the form 4868 to the IRS. Keep in mind that this form only extends your filing deadline, not your payment one.

In the undesirable case that you file your taxes late or not at all, expect penalties and interest to be added to your due amount. If you fail to file your return for five months, your accrued penalty is 25% of the total amount due that has not been paid. In case you file your tax return over 60 days after the deadline, the penalty is either 100% of the amount due or $435, whichever one is smaller. So, it’s obvious that filing your return late or not at all is not the way to go, even if you file for an extension. Your owed taxes will only increase and it will be even harder for you to pay them when the time comes.

What happens if you pay your taxes late?

In case you owe the IRS taxes and you have failed to pay them by the due date, things can get complicated. It doesn’t even matter if you owe 10K to the IRS or if you owe 50K to the IRS, the consequences are usually dire and they only get worse if you choose to ignore the letters from the IRS.

Besides the penalties and interest accrued on your due amount for failing to pay by the deadline (the maximum penalty, both for failing to file and to pay, that can accrue on your amount is 47.5% of the owed taxes), there are also the dreaded letters that you will start to receive. The IRS will first send you a letter of demand for your unpaid balance. Ignoring that will get you a Notice of Federal Tax Lien from the IRS. This is meant to notify creditors that the government now has a right over your assets, property, etc.

The next step, if you also ignore this second letter, is a levy that the IRS can issue on your name. This represents the initiation of the legal seizure of your assets, property, or anything else that can make up for your unpaid balance. A levy can also mean a garnishing of your wages through the employer.

The most extreme case when you owe the IRS money that you avoid paying is for them to press criminal charges for tax evasion. At this point, it’s considered that you are willingly avoiding the payment of your taxes and that you are involved in tax evasion schemes that must be punished. You can get up to five years of jail time for this crime but it must be noted that this is the most extreme form of penalty for not paying your taxes. Most of the time, it is only applied to those companies or individuals that have huge unpaid sums or have done this before.

Regardless, owing money to the IRS is not funny at all and the best thing that you can do is to file your tax return on time and also pay your taxes on time. This brings us to the next part of our article. What can a taxpayer do if they simply cannot pay their due amount? Well, this is the reason why tax relief programs exist. Here is everything that you should know about them.

What to know about tax relief programs

Tax relief programs are generally offered by the government to help individuals pay their balance in case they owe taxes to the IRS. There are options that you can pick before owing money to the IRS, like deductions, exclusions, or credits, which will diminish your due amount in various ways. However, the tax relief programs of interest in our case are those that you can count on after you’ve failed to pay your taxes.

The most important such possibility is the IRS Fresh Start program which aims to help people pay their owed amount and avoid serious consequences like the ones mentioned above. It was launched back in 2011 and, depending on your particular financial situation and amount owed, can compromise your back taxes for less than what you actually owe. There are four main options that taxpayers can choose from and they are all part of the Fresh Start initiative:

Offer in compromise

This type of federal program is only available if the taxpayer can prove that paying their owed amount in full would lead to financial hardship for them and their family. It works by settling your back taxes for less than the total amount owed. Again, you will only get accepted into this program if you owe a lot more money to the IRS than you would afford to pay.

Currently non-collectible status

As part of this federal program, the IRS establishes that your monthly income is way too small for you to be able to pay the amount owed and that if you do it, it would get you in financial hardship. Like before, the taxpayer has to provide proof of this situation and once they are accepted into the program, the IRS pauses the tax collection on your back taxes. All of the other aforementioned consequences of not paying your taxes will be stopped until you are in a favorable situation to pay. However, it’s important to know that the CNC status is not permanent. The IRS will regularly analyze your status and if they conclude that your situation has changed and you can now pay your taxes, they will resume the collection procedure.

Installment agreement

An installment agreement is also offered by the IRS and it allows you to pay your owed taxes on monthly basis over a certain period as opposed to paying the entire amount at once. However, keep in mind that penalties and interest will still be accruing on your balance even like this. Still, regardless if you owe 20K to the IRS or if you owe 50K to the IRS, an installment agreement can be a very helpful solution.

Penalty abatement

Last but not least, the penalty abatement solution from the IRS can either remove or reduce the accrued penalties on your back taxes if you can prove that you failed to pay your taxes for a valid reason. Some of the most serious reasons are natural disasters, fires, incapacitation, death, serious illness, etc. Remember that any of these reasons must be proven and that the IRS must consider them valid for the penalty abatement to be applied. Also, proof of your lack of funds as the reason for not paying your taxes on time does not count in this case.

Count on professionals

In case you find yourself behind on your taxes and wish to become part of one of the aforementioned IRS Fresh Start programs, it’s worth noting that getting accepted and gathering all the necessary documentation for this is not that easy. This is why our advice is to rely on the help of a professional tax relief company that can navigate these procedures in your place.

There are a lot of different companies that deal with this type of situation and they have tax experts that can guide their clients and help them pick the best option. While you will certainly have to pay the company a fee for its services, the results can be amazing and can get you out of trouble with the IRS.

The first step would be to compare some of these companies that offer tax relief help and see which ones suit your budget and have the best reviews. Once you have made your decision, contact them and be open to collaboration when it comes to your particular tax situation. Do not hide details about your taxes and do exactly as the respective tax professional suggests when it comes to tax relief programs. Remember that owing money to the IRS, while definitely not pleasant, is not the end of the world.