Are you scrambling over papers looking for information and worried about the consequences of owing more than $50,000 in taxes? Rightfully so. If you owe more than $50,000 in tax debt, this is not a minor issue and should not be overlooked. Read on to find out what you can do if you owe over $50,000 in tax debt.
Understand the Consequences of Large Tax Debt
Owing a large sum of money is not a good situation. Tax debt of more than $50,000 is considered a serious delinquency and may result in aggressive collection efforts.
The IRS can take a variety of steps to collect the amount owed:
Tax lien: the IRS places a claim on your assets.
Wage garnishments: A portion of your paycheck will be automatically withheld.
Bank levies: The IRS seizes money directly from your account.
Passport revocation: You may lose your passport privileges if you owe over $54,000.
As you can see, owing more than $50,000 in tax debt is serious. To prevent the situation from escalating, immediate action is required. More about this later in the article.
Review Your Tax Debt & Confirm the Amount
Instead of simply accepting the IRS’s tax debt amount, it is always a good idea to review and confirm it yourself to ensure its accuracy.
How to Verify Your Tax Debt
First, check your mailbox for IRS letters or notices and understand their contents. Look for any official IRS correspondence indicating a balance due. It is critical to remember that if you receive an official letter from the IRS, do not ignore it.
Next, access your IRS account by going to the IRS website and logging in. You can find your tax balance, payment history, and any outstanding liabilities here.
You should also check your previous tax returns to ensure they were properly filed and paid. To identify discrepancies, compare the IRS figures to those on your filed returns.
Another option is contacting the IRS directly with any tax-related questions or clarifications. To make the process go more smoothly, have all your information ready, including your social security number and relevant tax documents.
The steps to verify your tax debt are a process in their own right, and accuracy and effective communication are critical. Hiring a tax attorney is vital in ensuring a successful verification process.
The benefits of seeking professional assistance include understanding the problem, identifying inaccuracies or discrepancies, communicating on your behalf, and exploring the best solutions.
Explore Your Tax Debt Resolution Options
The good news is that the many options available to taxpayers can resolve most tax issues.
Installment Agreement (Payment Plan)
An Installment Agreement (IA) is a payment option whereby taxpayers can pay off their debt in periodic installments (usually monthly). This way, you can manage your debt and ease your financial pressure.
Note that there are many types of Installment Agreements. When you owe over $50,000, you can have a streamlined or non-streamlined installment agreement.
Learn more by reading our piece about IRS Installment Agreements.
Offer in Compromise (Settle for Less Than You Owe)
An Offer in Compromise lets you settle your tax debts for less than you owe. The IRS provides this program with many types of OIC designed to help taxpayers facing various financial issues.
For example, the Doubt as to Collectability (DATC) option is available if you cannot pay your entire tax debt. If the IRS finds reasonable doubt, you may be allowed to pay your debt for a lesser amount.
Currently Not Collectible (CNC) Status
Currently Not Collectible (CNC) Status is available for those who cannot afford to pay off debts without causing significant hardship. For example, if you cannot fulfill basic living expenses, the IRS can put you on a CNC, delaying any collection process.
However, it is essential to remember that qualifying for a CNC does not mean your debt goes away.
Penalty Abatement & Interest Reductions
If you fail to pay or file by the deadline, you may be able to reduce or eliminate penalties based on your situation.
For example, if you have a clean record and a good compliance history, you may be eligible for the first-time abatement program, which reduces or eliminates your interest payments. If you qualify, this type of debt relief can be applied regardless of the size of your penalty.
Other options include Reasonable Cause Penalty Relief, which waives certain penalties if there is reasonable cause, such as serious illness that impairs your ability to file or pay taxes, natural disasters, or civil disturbances that prevent you from filing a return or making a tax payment, and inability to determine the amount of tax due for reasons beyond your control.
Bankruptcy (Last Resort Option)
Filing for bankruptcy can discharge certain tax debts. However, the requirements are strict. For example, the debt must be at least three years old, and the tax return must have been filed at least two years ago.
Bankruptcy should only be used as a last resort to resolve tax debts. This is because filing for bankruptcy can have long-term financial consequences, such as a negative impact on your credit, difficulty obtaining loans, employment challenges, etc.
Why Hiring a Tax Attorney is Crucial
If you owe over $50,000 in tax debt, you should resolve the issue immediately and get everything right the first time. This includes thoroughly understanding the problem and the available options, selecting the best options, and accurately applying for the best solution.
In these cases, hiring a tax attorney is an excellent option. As an expert in the field, a tax attorney can assist you at each stage. For example, a tax attorney can effectively negotiate with the IRS to reduce debt and halt aggressive collection efforts.
Furthermore, professionals can help you determine the best resolution strategy for your situation, ensure that all steps are taken according to IRS requirements, and avoid future tax issues.
A tax attorney is your best resource for defending your rights and financial interests. If you have complex tax problems, seek professional help.
Hire Greenberg Law Group, P.A. Today!
Greenberg Law Group recognizes that certain tax issues, such as owing more than $50,000 in tax debt, are serious matters. Because we understand the complex issue, we know that it must be addressed effectively and timely.
Greenberg Law Group can guide you through responding to the IRS, contracting and negotiating with the authority, and selecting the best resolution that meets your needs and end goals. Do not wait until it is too late. Contact Greenberg Law Group today, and let’s start resolving this issue!
