In the year 2011, the IRS showed its effort to help the struggling taxpayers to get afresh with their tax liabilities. They had the goal of helping the individuals and small businesses meet their tax obligations without adding unnecessary burden to the already hapless taxpayers. Despite the efforts of the IRS to implement changes to the tax filing practices, yet there are many people who are still finding it tough to file their tax returns on time. Who would want to be under the gun of an IRS tax audit? Remember that incurring tax debt is not like any other debt as you may have the government running behind you to recuperate the money. Unlike the private loan institutions, the government will never hesitate before taking a drastic step against you. Before you know the steps to become debt free from all your tax debts, you should take into account some important points about tax planning.
Reduce tax debt, pay back taxes and avert the IRS issues – What steps to take?
As the economy slowly begins to rebound from the shocks of the depression, there are about 30 million Americans who are plagued with some kind of tax issues. Moreover, with the IRS collection efforts on the rise, a large number of Americans are a target of the IRS and they’re desperately looking for some tips to avoid IRS issues. Read on to know about them.
- Hire a CPA for filing tax returns: When you’re making tax returns by filing simply short forms, you may find it convenient filing yourself but problems may creep in when you’re making itemized deductions and you’re oblivious of the tax law changes. A CPA will be able to guide you throughout the process and most tax preparers won’t accept any kind of liability if an audit is declared.
- Keep scrupulous records: The better and smoother will be the process when you ensure keeping a meticulous record of every required document. For filing regular individual returns, you’ll require the W2 forms, bank records and mortgage records and if you’re a small business organization, you may need every detail that goes and comes in the form of your monthly income.
- Report your income accurately: Any money that comes in a particular month should be recorded on your tax return. Though some of it may not be subject to tax, yet you should report them. Don’t even leave out alimony payments and lottery winning amounts.
- File promptly: The most common reason for incurring huge amount of tax debt is that people are not serious about filing their tax returns. If you can plan your taxes well, this should allow the date your taxes need to be in. File as early as you can so that you can file the supplementary form in case there are mistakes.
Tax debt repayment methods – Options to resort to when your efforts are futile
Even though you smartly follow the above mentioned points to stay off the IRS gun, there are people who may still incur debt. What are their options? Have a look.
- The various installment methods: You can either take resort to the guaranteed installment agreement option, streamlined installment agreement option or the partial payment installment option. However, you need to owe an amount of maximum $10,000 and $25,000 respectively to qualify for the first two options. And when you still can’t make payments within your budget, you may opt for the last option. Such installment options helps you revise and relax the repayment structure and helps you avoid debt.
- Offer in Compromise: Just as you settle your credit card debts for an amount that is less than what you owe, you may also settle your tax debts by opting for the OIC. The IRS will consider your income, ability to pay back, your expenses and your asset equity before deciding your fate.
Tax arrears can often keep you awake at night as the IRS will be haunting you for repayment of the money. Take into account the tax planning tips and avoid tax debt to lead a simple debt free life.
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