Taxes Owed? Here’s How to Avoid Penalties and Understand Your Options

Taxes Owed: Understanding Your Options and Avoiding Penalties

As a responsible citizen, you know that paying taxes is not only a legal obligation but also a civic duty. However, despite your best intentions, you may find yourself in a situation where you owe taxes to the government. This could happen due to various reasons such as an error in tax withholding, unreported income, or changes in tax laws. Whatever the cause may be, the important thing is to address the issue promptly and appropriately. In this post, we will discuss what you need to know about taxes owed and how to deal with them.

First of all, it’s essential to understand that owing taxes does not necessarily mean that you have done something wrong or illegal. It’s possible that you simply underestimated your tax liability or had unexpected income during the year. The IRS (Internal Revenue Service) understands that taxpayers can make mistakes, which is why they offer several options for resolving unpaid taxes.

The first step when you realize that you owe taxes is to determine how much exactly you owe. You can do this by reviewing your tax return and comparing it with your payment records. If there are any discrepancies or missing payments, contact the IRS immediately and ask for clarification.

Once you have established the amount owed, consider whether you can pay it in full or need help from the IRS. If you can pay within 120 days after filing your return without accruing additional interest and penalties than this would be an ideal option for most people who might use their savings account balances if available otherwise they might apply for personal loans at lower interest rates than those imposed by IRS on overdue amounts.

However if paying off debts isn’t feasible then applying for installment agreement should be considered seriously! Under these agreements taxpayers generally get up-to 72 months maximum period wherein they agree on monthly payments according to pre-decided terms & conditions set forth by both parties involved i.e., taxpayer & IRS.

Another option is to request an Offer in Compromise (OIC) – this allows you to settle your tax debt for less than the full amount owed. This option isn’t available for everyone and requires a detailed application process where taxpayers show that paying the debt would cause undue hardship or there is doubt as to whether they can pay their taxes due.

The third alternative is filing bankruptcy but it should be done only after consulting with legal advisers first since it could have other implications on one’s financial status & credit history.

It’s important to note that simply ignoring your tax obligations won’t make them go away, and may lead to serious consequences such as wage garnishment or asset seizure by the government. Therefore, it’s always better to take proactive steps towards resolving unpaid taxes before things get worse.

One thing you should not do under any circumstances is file false tax returns or withhold information from the IRS. This will only compound your problems and could result in criminal charges against you.

If you’re struggling with debts then taking help from Tax professionals (such as CPAs or Enrolled Agents) who specialize in taxation matters might be helpful too! They can guide you through complex procedures involved in dealing with unpaid taxes while also minimizing any penalties assessed by IRS based on late/non-payment of dues.

In conclusion, owing taxes doesn’t have to be a daunting situation if dealt with responsibly through proper channels provided by law enforcement agencies themselves. Whether opting for installment agreements, OICs, bankruptcy filings or seeking expert advice from tax professionals; being prepared ahead of time helps people avoid unnecessary hassles & consequences resulting from non-compliance issues faced when dealing with overdue amounts owed towards Government entities like IRS etc.,