Owing the IRS money usually is the result of other financial problems. Even worse is that tax debts can often lead to further financial hardships if they aren’t deal with properly. For many people, unpaid taxes can bring about many unwanted effects.
Let’s not forget that the IRS is not like any other creditor. In fact, they have the ability to implement tax liens, garnish wages and apply large penalty fees for unpaid taxes. Anyone who has experienced any of these IRS collection attempts knows just how far the rabbit hole can go. In some cases, people may be forced into bankruptcy or tax debt settlement in attempt to resolve their tax troubles. Unfortunately, most tax debts are not dischargeable in bankruptcy, leaving many people stuck paying the tax bill even after their other debts have been discharged. Further, tax debt settlement is not always the best option for resolving tax debts as they can complicate future credit circumstances.
The news regarding tax debts is not always bad. In fact, the IRS is relatively tolerant and understanding of taxpayer’s financial situations. However, they must be aware that the taxpayer is experiencing problems if they can offer a tax debt solution to help. Taxpayers may be able to repay their debts through an installment plan, over a series of smaller increments. Those who cannot afford their debts may be granted an IRS approved Offer In Compromise, or settlement agreement.