Unfortunately, almost everyone who earns an income or owns assets has to pay federal and state taxes. With the cost of living spiraling out of control and many businesses struggling due to COVID, it’s not a surprise that millions of taxpayers can’t pay their bills. If you’ve googled “what is tax debt”, you might wonder whether you owe the IRS money. A good Louisiana tax resolution specialist can help you sort out your situation and get back on track.
They can have a look at your tax return and let you know how much money you still need to pay. What’s more, they will discuss the penalties and fees with you. When you don’t pay your taxes on time, you have to pay interest. Your advisor can let you know how much the government is charging you and what this means for your total tax bill. Then, they can help you access the IRS’s forgiveness program, so your penalties stop accumulating.
What Is Tax Debt?
Tax debt is any money you owe the IRS or your state. Each year, you have to pay your taxes by a certain date, and if you fail to do so, you have tax debt. At first, the consequences are mild. You might have to pay slightly more, but the failure to pay penalty accumulates slowly.
However, if you don’t pay for a long time, the government has the right to garnish your wages, take away your property, and take money out of your savings accounts. Because the IRS has almost unlimited collection power, you should resolve tax debt issues as soon as possible.
What Is the Interest on Unpaid Tax Debt?
There’s no easy answer to this question because the interest rate on unpaid tax debt changes over time. Generally, it is calculated as the federal short-term rate plus three percent, and you will be charged interest from the due date until you pay your bill. The interest compounds daily, which means that your tax debt will grow every day you delay paying.
For most people, the deadline is April 15, so you should plan to have your tax money ready by then. If you think that you won’t be able to pay by then, you should contact a Louisiana tax resolution specialist as soon as possible. Your expert will help you file your return and show you what your options are. If you tell the IRS before the deadline that you need more time, they might not charge you interest.
What Is the Failure to File Penalty?
No matter if you can pay your taxes or not, you should always file your return because there is a hefty failure to file penalty. If you don’t complete and submit the return on time, you will be charged 5% more every month until you’ve hit the cap of 25%. As you can see, this can quickly add up to a significant amount of money, especially if your tax bill is very large.
As soon as you realize that you haven’t filed or that you will be late this year, you should contact an expert. Under certain circumstances, you can get an extension, but you have to tell the IRS ahead of time that you won’t be able to file on time.
What Is the Failure to Pay Penalty?
People who can’t pay their taxes should still file their returns because the failure to pay penalty is much slower to accumulate than the failure to file penalty. For each month you delay paying, you will be charged an extra 0.5%, up to a maximum of 25%. As you can see, this means that you’ll only pay 6% extra if you delay your payment by a whole year. In contrast, you’ll pay 25% more if you don’t file your return within five months of the deadline.
If you believe that you’ll have trouble paying your taxes, you should ask for professional help. Although the failure to pay penalty builds up slowly, it can still add up, and you should remember that you’ll also have to pay the above-mentioned interest on top of the penalty. Your tax resolution specialist can help you extend the deadline or reduce your payments, so they become more manageable.
What About Louisiana State Taxes?
So far, we’ve only covered federal taxes. But if you’ve googled “what is tax debt,” you might also be curious about Louisiana state taxes. You will be charged interest if you fail to pay your state taxes on time, but the rate varies by year. In recent years, it has fluctuated between 0.5 and 0.8%, but you should check the Louisiana Department of Revenue’s website for details on the current rate.
The failure to file and failure to pay penalties the government charges are also applicable to state taxes. If you’ve accumulated penalties and fees already, you should ask your tax resolution specialist whether they can be taken off your account. People who have a valid reason for filing or paying late or those who have never made a mistake on their return before sometimes don’t have to pay these extra charges.
How Can I Get Rid of Tax Debt?
There are several ways of addressing tax problems. First, you can access the IRS’s forgiveness program. The most common solution is an installment agreement, which allows you to pay off your debt over a longer timeframe. However, you might also qualify for an offer in compromise, which reduces the total amount of debt, or currently not collectible status, which states that you have no money left over to pay your taxes at the moment.
Sometimes, using the official forgiveness program isn’t the best solution. Instead, you might benefit from putting your debt on a 0% interest credit card or taking out a personal loan, which might be cheaper than using the installment agreement. Your tax resolution specialist can discuss these options with you and help you decide which one is most appropriate.
How Can I Find High-Quality Louisiana Tax Resolution?
The earlier you speak to a tax resolution specialist, the better. If you resolve your tax problems before interest has accumulated, you’ll have to pay less, and you won’t be at risk of having your wages garnished or your property taken away by the IRS. To find the best specialist, you should first check the websites of local companies. Always select someone who has the relevant qualifications and first-hand experience with the government.
Our employees have over 35 years of experience in the field of tax resolution, and we can therefore provide you with an excellent experience. Give us a call or send us a message. Together, we can then discuss your situation and find the best solution to your tax problem.
What is tax debt? Tax debt is any money you owe the IRS or your state, which hasn’t been paid by the due date. Over time, interest and penalties accrue on your account, so the outstanding amount increases. Get in touch with us at Geaux Tax Resolution in Mandeville, LA to find out more about our Louisiana tax resolution services. We can negotiate with the IRS for you, so your tax debt stops accumulating and you can finally pay it off.