Got tax trouble?
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Owing Uncle Sam without the means to pay is a terrifying prospect. If you’re considering Greensboro bankruptcy to help dig out of debt, you should know that back income taxes might be eligible for relief in Chapter 7 or 13.
File even if you can’t pay!
The worst thing to do, believe it or not, is to skip filing your income taxes when you can’t afford to pay. You might think not filing will delay (or avoid) tax assessment, but not filing usually triggers harsher outcomes - the IRS calculates a worst-case tax return for you!
They don’t give you the benefit of itemized deductions or tax credits and will assess you at the maximum possible rate and then try and collect that from you. If you at least file your return, you’ll have a lower tax bill, even if you can’t pay it.
The awesome collection powers of the IRS
The IRS is one of the few creditors that can garnish your wages in North Carolina. They can also siphon your bank account or put a lien on your home or other assets. They can continue to come after you for 10 years after the date of the tax assessment, but this can be prolonged by failing to file.
How can you get out of tax debt? There are three primary ways for Greensboro consumers to get the IRS off their back: pay up in full, plead for a payment plan or lower settlement, or file bankruptcy. Your income, assets, and circumstances determine the outcome from each option.
#1 Pay what you owe
You could take out a loan to pay your tax debt such as a second mortgage on your home. You might also charge the tax debt on your credit cards or drain your 401(k) and hand over the money to the IRS to stop the threats and anxiety of having them on your back.
But if you can’t afford your taxes, you probably also can’t afford to pay the credit card or loan you might use to pay the tax man. Using your 401(k) won’t trigger debt, but this may be a worse outcome since you’re shortchanging your future and ability to support yourself as a senior.
#2 Work out terms with the IRS
You can ask the IRS to settle for a lower amount, but if they come down from the total they will often demand cash in a lump sum to accept the settlement. If you can work out a deal for pennies on the dollar, this might be feasible, but the IRS isn’t known for being reasonable.
If the IRS determines you can pay the full amount in installments, they may do that but often won’t offer you both a lesser settlement amount and installment payments. Hiring a tax attorney to negotiate on your behalf may get better results, but that’s added expense.
#3 File bankruptcy
While income taxes aren’t auto-discharged in Greensboro bankruptcy like credit cards and medical bills (in Chapter 7), they may be eligible for relief. Tax debts for returns filed on time and that have been outstanding more than two to three years may be eligible for discharge.
With Chapter 13, you can buy time to pay tax debts as part of your three- to five-year repayment plan and end wage garnishment and other dire consequences. Your options depend on the type of tax, when or if you filed your return, and how long since filing and, of course, your income and assets.
Putting your head in the sand won’t make the tax man go away. Doing nothing is the worst approach. To discuss your options to deal with the IRS, contact the Law Offices of John T. Orcutt today for a no-obligation consultation.
Read reviews from our satisfied clients, then call +1-919-646-2654 to schedule a free Greensboro bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.