Each year, thousands of Americans fall into a delinquent status with the IRS due to unpaid taxes. Not only does this put an incredible financial burden on the taxpayer in question, the IRS and the U.S. federal government feel the pressure as well. In 2012, President Obama expanded the Fresh Start Program, a government-funded program that allows the IRS and taxpayer to negotiate on payment terms and total amount due, to try to solve the issue of back taxes.
What is Back Tax
Back taxes are taxes that have been partially or fully unpaid in the year that they were due. Back taxes do not discriminate and can affect anyone from the rich to the poor, from the unemployed to the CEO. Whether back taxes have been haunting you for years or a recent audit flung them upon you unannounced, tax debt can dramatically affect your credit, ability to purchase a car or house, and even result in your property being ripped away from you.
If you struggle with back taxes, the process is terrifying and nauseating, especially when are not in the financial position to pay the IRS back. As time ticks on, your amount due continues to rise due to penalties and interest, and it seems as if there is no hope to help you out of this hole.
How Back Taxes Affect the IRS
While Americans often consider the IRS to be the “bad guy”, in reality, each year due to taxpayers underreporting, underpaying and not filing their taxes, our national deficit takes a major hit. The difference between what taxpayers owe and what they end up paying to the federal government is known as the Tax Gap. According to the latest IRS tax gap report which covers years 2008-2010, there was a whopping $458 billion dollar reported gap between what the IRS was supposed to receive and what was actually paid. The revenue that the federal government expects to receive from yearly taxes is preallocated to public programs, roads, military, and more. When there is a tax gap, at both the state and federal levels, our country’s economy and people are the ones who end up suffering.
The IRS has a number of scare tactics to pressure those who owe back taxes to pay up. The IRS is the world’s largest and most aggressive tax collection agency and regularly flexes that power on the American people.
Legally, the IRS has the power to garnish your wages, take money directly from your paycheck before it even reaches you, levy your bank account, place a hold on your finances, or place a lien on your property, take ownership over your house, car, and other assets.
However, recent studies have shown that these scare tactics are not the most effective way of collecting tax debt. In fact, the IRS is able to collect a higher percentage of the debt that it is owed when the taxpayer seeks out tax relief from a third-party.
Tax Relief Helps You
There are a number of ways to negotiate your tax debt with the IRS, but the easiest and most hassle-free is to hire a tax relief agency to represent you. That way you no longer deal with the IRS’s harassment, and you take back the control of your finances and your life.
Tax relief companies can help sift through the complicated tax code and find the best repayment plan for you.
One of the most common ways to resolve your debt with the IRS is to apply for installment agreements to pay back your debt over time. By setting up an installment plan through a tax relief agency, you no longer have to deal with the IRS bureaucracy and instead have a clear and reasonable path the financial freedom.
A tax relief agency can also help you negotiate an Offer in Compromise (OIC) which is when the IRS agrees to lower or eliminate your debt entirely. OIC’s are rare, but after Obama’s expansion of the tax relief program in 2012, they have become significantly more common.
Additionally, tax relief agencies can help fight liens, levies, and garnishes that have been placed on you by the IRS that otherwise would limit your financial freedom and ruin your credit.
There are many firms around the United States that offer tax relief services but note that they are not all created equal. While searching for a tax relief agency, make sure you do your research to find a credible company. “Customer reviews and the BBB are some of your best resources you can utilize when identifying a reputable tax relief company,” said Sam Price, CEO of TaxRise (Source). Tax debt causes plenty of stress and fear in American people and fraudulent companies are abundant and ready to take advantage of innocent customers just looking for help.
Tax Relief Helps the IRS
If you work with a tax relief agency, they may be able to resolve your tax debt at a fraction of the price that you originally owed. With that being the case, how does tax relief help the IRS?
According to the IRS, when taxpayers work with tax relief agencies to settle their tax debts, it results in higher revenue collections than when the IRS places a levy or lien. Many times, when the IRS takes strong action against a taxpayer, the odds of a collection is greatly reduced as the taxpayer’s financial situation becomes more and more dire. The IRS also employes private debt collectors who attempt to work with the IRS to collect debt. However last year, the IRS paid a whopping $20 million dollars for these private debt collectors only to yield a measly $6.7 million in return.
Instead of going after Americans who have tax debt with fire and fury, tax relief firms provide people compromise and a reasonable way out of their debt. These programs are able to implement a judicious payment plan that allows the IRS to collect some of the debt they are owed that they otherwise would not have received.
And the best part? When people work with tax relief agencies, the whole process is able to be streamlined with the minimum amount of money spent out of the IRS’s pocket.
Tax relief programs are successful for both parties involved because the taxpayer is able to pay down their tax debt and get their financial life back on track, while the IRS receives the revenue it needs to support the country.
The Future of Tax Relief
When struggling with back taxes, many Americans panic. When the IRS is threatening you with financial ruin, many don’t know whom to trust or to turn to.
Thankfully, tax relief firms are ready to take on your case and resolve your financial crisis, but surprisingly, working with a tax relief firm is still a relatively underused resource. Whether it’s because Americans don’t know that tax relief is available or they’re hesitant to reach out for help, thousands of Americans try to face the IRS on their own to little or no avail. As tax relief programs become more popular, the IRS and the American taxpayer can work better together and create a stronger America.