Understanding Tax Resolution
This is a general description of the processes and strategies used to resolve issues regarding taxes with the IRS or state tax authorities. These can range from paying bills in agreed-upon installments to arguing over tax dues. Tax resolution services are all about figuring out how a taxpayer can minimize the amount of back taxes owed without incurring drastic measures such as wage garnishment, bank account freeze, or sale of property.
Common Tax Problems
Some instances that lead to tax issues include the inability to file tax returns, evasion of taxes by under-declaring income, and accumulating hefty tax dues. Here are some common tax issues that might require resolution:
Unfiled Tax Returns: Some common mistakes include failure to file their tax returns and incurring penalties and interest. The IRS has laid down some rules and regulations while filing taxes, which has severe consequences if one breaks the rules.
Tax Debt: Taxes can easily become a rather large debt if one is unable to pay the full amount in a timely manner due to penalties and interest charged. Tax resolution, on the other hand, seeks to find a way of addressing this debt with the intention of eradicating it in the process.
udits: Audits are always daunting, especially when the IRS is auditing one. If differences are determined, it could lead to more taxes, penalties, and interest being owed.
Tax Liens and Levies: The IRS is authorized to seize your assets, such as your home or the money in your bank account and your wages, to recover this debt. This can lead to poor financial health and credit rating, which are unhelpful, especially in today’s economy.
Methods of Tax Resolution
There are various approaches available for solving tax disputes. All of them are based on the taxpayer’s specific case details. Here are some common strategies:
Installment Agreements: This enables the taxpayers to discharge their dues in small portions over a certain period, in this case, one month. The IRS provides several installment plans depending on the amount of the owed tax and one’s ability to pay.
Offer in Compromise: This is a settlement option where the taxpayer settles his/her tax debt at a lower amount than the full amount. It is only for those who can provide evidence that, in case they paid the full price, it would be difficult for them to make ends meet.
Currently Not Collectible Status: In cases where a taxpayer cannot afford to pay the assessed tax amount due to hardship, he or she can ask to have the account categorized as currently not collectible. This temporarily freezes all collection activities, though interest and penalties will keep on accumulating.
Penalty Abatement: If the taxpayer can show reasonable cause, such as serious illness, natural disasters, or other circumstances that prevented the taxpayer from filing the returns on time, then the penalties can be reduced or eliminated.
Innocent Spouse Relief: If the taxpayer’s spouse or former spouse misreported or failed to include an item for the joint return, the innocent spouse can seek relief from the extra amount for tax.
The Process of Tax Resolution
The process of resolving tax issues typically involves several steps:
Consultation: The first thing that a taxpayer should do is to seek the help of a tax resolution specialist or attorney to discuss his case and get advice on the best approach to take.
Filing Compliance: However, one should fully comply with all tax returns before any strategy can be implemented. This means preparing all unfiled tax returns from the prior year.
Financial Analysis: Each proposal takes a different approach, and a detailed financial analysis will assist in determining your ability to pay for the different options available and the best way forward.
Negotiation: Your tax resolution specialist will then negotiate with the IRS or the state authorities to obtain the best possible settlement.
Implementation: After reaching an agreement, you must stick to the agreed-upon plan to avoid a negative encounter when addressing your tax concerns.
Conclusion
Dealing with taxes can be a challenge and, at times, a daunting experience; however, it is the only doorway to solving issues and achieving creditability. It is crucial to understand the possible ways to deal with your problems and consult a specialist regarding tax-related concerns. It is essential to realize that leaving tax issues unresolved will not help and will only worsen the situation, and therefore, the individual must act to resolve the problems. Regardless of whether you are dealing with unfiled returns, tax debt, or an audit, there is always a solution in order to retake control over your financial life.
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