Owing taxes is fairly commonplace for residents in New York and elsewhere. While many individuals and families prepare for paying taxes each year, for some, this can be extremely burdensome for those struggling financially. Not paying taxes due could result in penalties and could initiate the collection process. However, many are not aware of what this process entails and what options they might have.
What is the federal tax collection process? When an individual does not pay their tax bill in full, the IRS will send a bill, which then initiates the collection process. This can continue with various alternative payment options if it cannot be paid in full, and it will end once the account is satisfied. This bill will include the amount past due, any penalties associated with it and the interest that has accumulated at this point in time.
Because interest is compounded daily and penalties are added each month the payment is late, it is vital that one pays off tax liability as soon as possible. Thus, if an individual is unable to pay off their balance, it is possible to work with the IRS to obtain a payment plan tailored to their situation. If one does not qualify for an installment payment plan, this is not the end all. It is also possible to file an offer in compromise. This is an agreement between the taxpayer and the IRS to settle any tax liabilities of the taxpayer.
When contacting the IRS, whether to inform them that one is unable to pay an upcoming tax bill or to work out a payment agreement, it is important that one is prepared for this conversation. This means having information and documents regarding their income and expense information readily available.
Navigating the tax collection process can be challenging. This is especially true when an individual is just seeking to stop it. While it may seem like an overwhelming time, it is possible to work through tax debt, arriving at a solution that can be beneficial. Thus, it is important to explore your legal options and what steps to take to protect your rights.