Over 13 million Americans are in Tax Debt: Could You Need Help?

In a recent data release, the IRS showed that over 13.1 million people in the United States have some form of tax debt. Some 7.93 million accrued that debt in tax year 2018-19. Could you be among them? If so, you may need help from us at Defense Tax Partners. 

Why do people get into tax debt?

There are many life events that could lead you to be unable to pay your taxes. Here are four classic examples:

  • Business going bust due to quarantine after a successful run before
  • Divorce and family breakup
  • Sickness and disability affecting you or your family
  • Job loss

In all of these cases you may have had a decent income in the months and years before but for whatever reason your income has dried up. This happens all the time, but there are ways forward. 

There are other cases such as inaccurate accounting and poor record keeping leading to the tax bill being a surprise. You may well have been through one of the four situations above and overlooked the bookkeeping as you fought to survive. 

Don’t stick your head in the sand!

Do not be like an ostrich and bury your head in the sand, ignoring letters from the IRS when you get in trouble – that is the worst thing you could do!

Though calling the IRS to discuss their letter can take a long time, it will save on punitive action further down the line. 

If you have a tax bill that leaves you very worried then it may pay to contact us as soon as the first letter from the IRS arrives. We can lead you through the process and negotiate with the authorities on your behalf. 

Punitive action that the IRS can take

As the primary source of the government’s income, you would not be surprised to know that the IRS has a lot of powers to make life difficult for you. 

The data release we referred to above showed that 543,604 Federal Tax Liens were issued in 2019. These are reports to credit reference agencies that badly affect your ability to get credit from private providers and banks. You may have to get a subprime mortgage or car loan for example. Given that 7.9 million people and businesses entered into tax debt in 2019, that amounts to roughly one in 14 IRS accounts that became delinquent, or one in 26 that were live debts with the IRS in that time period. 

Other approaches that the IRS can take include:

  • Penalty charges for failure to comply with requests, adding to your tax bill
  • Wage garnishment, where the IRS can force your employer to pay a significant proportion of your income to them 
  • Tax authorities can issue a ‘bank lien’ where they effectively seize your bank account to repay the debt
  • Taking possession of other assets such as cars or second homes. 
  • And yes, through the State Department they can annul your passport and issue an ID document for you to fly back to justice
  • Prosecution

These – and other approaches – are largely designed to make you come to the table to discuss your debt. The more open and honest you are from the start the less likely such efforts will be made against you. 

What we can do to help

At Defense Tax Partners we have a wealth of experience in negotiating with the IRS and state tax authorities on client’s behalf. 

We can do that better than you may be should you try yourself. Why? Tax debt is our business, and we know the system. This means that we can get penalty charges forgiven without you having to pay them in some cases. We can increase your withholdings in other cases too, reducing your original debt. 

The IRS data release showed that 2.8 million new installment agreements were agreed with the IRS in 2019. This is a system where you pay down your tax debt over a period in monthly installments. 

In some cases the IRS agrees an offer in compromise where you can end up paying a far smaller amount than the original bill thanks to proving you are unlikely ever to be able to pay the debt due to your personal circumstances such as illness or disability. This does require legal expertise and is something we have achieved for our clients on several occasions.   

Get in contact with Defense Tax today!

If you have had letters from the IRS and feel the time is right to get expert help, contact us today to discuss your needs!