What Options Do I Have if I Owe More in Taxes Than I Can Afford?
May 25, 2021
According to data from the Internal Revenue Service Data Book, more than 11 million taxpayers owe a combined $125 billion in past-due taxes, interest, and penalties to the IRS in 2019 alone. Failure to pay your back taxes can expose you to possible fines and other potential penalties. Additionally, you may also be denied your public benefits. However, if you owe the IRS more than you can afford to pay, there are a few possible solutions that can offer you relief. A knowledgeable Texas tax law attorney can evaluate the unique details of your situation and help you decide the best way to resolve your tax issues.
Here at my firm, the Law Office of Joseph Onwuteaka, P.C., I have the resources and experience needed to guide you through any tax-related challenges you may be facing. As your attorney, I can review the circumstances of your financial situation and help you understand all of the possible legal options that you have available in an effort to provide the relief you need.
I can also help negotiate a structured payment plan with the IRS or help you explore additional options so that you can have every chance at achieving the financial freedom you deserve. My firm proudly serves clients across Texas, including Houston, Harris County, and the surrounding communities — so call today to learn more about how I can help you with your tax situation.
The IRS Collection Process
The IRS collection process involves a series of actions that the tax authority can take to recover past-due taxes if you fail to pay them voluntarily and on time. The collection process starts when a taxpayer receives a bill stating the amount owed in back taxes, including penalties and interest owed. You will continue receiving a bill unless any of the following happens:
You repay your past-due taxes in-full
You satisfy your accounts
The collection period expires and the IRS becomes unable to recover back taxes legally
First Notice (Bill)
The first notice (or bill) that you will receive is a letter clarifying your outstanding balance, available payment options, and the due date. The bill will also show any interest and penalties accumulated during that time period.
If, as a taxpayer, you are unable to pay your back taxes in full immediately, you may be eligible for a short-term or long-term payment plan.
You will receive a final bill if:
You fail to pay the past-due taxes using the payment plan
You decide not to reach out to the IRS or respond to the notification.
If you ignore the final bill, the IRS is within its rights to take additional action to collect the back taxes you owe.
What Collection Actions Can the IRS Take?
If you fail to pay your back taxes voluntarily and on time, the IRS can recover their money through any of the following collection methods:
Federal tax liens
Offsetting future refunds
Notice of intent to levy
Seizure of your assets and property
Denial of passport renewal
What Payment Options Do I Have?
If you owe the IRS more than you can afford to pay in past-due taxes, you do have a few different payment options that can ease the burden of repayment. A few of the possible options to seek tax relief include:
Taxpayers who can’t make full payments immediately may be given extra time to pay the balance. Depending on the amount owed in back taxes, you can choose between a short-term or a long-term payment plan.
Short-term Payment Plan: A short-term payment plan is available for taxpayers who owe less than $100,000 in combined taxes, interest, and penalties. This plan is designed to last for 120 days or less.
Long-term Payment Plan: A long-term payment plan, also referred to as the Direct Debit Installment Agreement (DDIA), gives a taxpayer more than 120 days to pay the balance. The plan is available for taxpayers who owe $50,000 or less in combined taxes, interest, and penalties.
Offer in Compromise
An offer in compromise (OIC) is an agreement between a taxpayer and the IRS that allows the taxpayer to offset their tax debt by paying less than the full amount owed. It involves paying an agreed-upon reduced sum. This may be a legitimate option if you owe more than you can pay or if paying the full tax liability puts you in financial hardship.
Delay Collection Efforts
If paying your full tax liability makes it difficult for you to meet your basic needs and settle monthly expenses, you can request for the IRS to delay their collection efforts temporarily, until you are more financially stable so that you can pay the balance that you owe.
The penalty for a refusal to pay past-due taxes or any other form of non-payment may include the following:
Filing charges for a failure-to-pay penalty
Fines of 0.5 percent per month and can accumulate to a maximum of 25 percent of the original balance owed.
Placing a levy on or seizing your assets and property
Placing a lien on your property
Placing a levy on your financial accounts
Garnishing your wages
Work with An Experienced Texas Tax Attorney
Resolving tax debt issues and filing past-due taxes in Texas often involves a number of complex procedures. When you owe the tax authorities more than you can afford to pay, things can quickly become complicated and overwhelming. Therefore, if you find yourself in a situation where you owe more in taxes than you can afford to pay, it is imperative that you consult with an experienced tax law attorney as soon as possible. Your attorney can review all of your possible legal options and provide reliable legal guidance that can help you move forward.
Here at my firm, the Law Office of Joseph Onwuteaka, P.C., I am dedicated to offering comprehensive guidance and representation to clients facing difficult legal issues related to tax law. As your attorney, I can review your tax records line by line and help calculate your outstanding balance with the IRS. I will also explore all possible tax relief options that you have at your disposal and determine a strategic course of action that can help you take your first steps toward financial stability. Using my extensive experience, I will work to negotiate a reduced payment or outline a feasible payment plan with the IRS that can work for you.
If you or someone you know is stressing over the amount you owe in back taxes, contact my firm — the Law Office of Joseph Onwuteaka, P.C. — today to schedule a one-on-one case assessment. I can offer you the experienced legal counsel, guidance, and advocacy you need to settle your tax issues and help you achieve the debt relief you deserve. My firm proudly serves clients across Texas, including Houston, Harris County, and the surrounding communities — so call or reach out today to learn more about how I can help you with your case.