America’s tax system is multi-layered and complex. It’s not a surprise that millions of people struggle to pay their taxes every year. If you’ve researched Louisiana tax resolution strategies online, you might have come across the IRS forgiveness program. But what exactly is this, and can it help reduce what you owe on state taxes? Let’s have a closer look at the available programs and how they work.
Will an IRS Forgiveness Program Help Reduce What You Owe on State Taxes?
People who struggle to pay their federal taxes can take advantage of the forgiveness program. There are several options, and while some of them reduce the amount owed, others simply spread out the payments. It’s always best to negotiate and find an appropriate solution instead of ignoring tax bills because the IRS has immense collection power and can access assets and wages.
Unfortunately, the forgiveness program can’t help reduce what you owe on state taxes. Each state has different tax rates and regulations, and local government departments handle the collection process. If you don’t think you’ll be able to pay your state taxes this year, you need to negotiate with the Louisiana Department of Revenue. An experienced tax expert can help you find a solution.
What Does the Forgiveness Program Do?
Federal taxes are usually much higher than state taxes. That’s why the forgiveness program is so important. The most accessible option is the installment agreement. If you have a small amount of debt, an IA can be set up online or over the phone. It spreads out your payments over months or years and prevents you from having your wages garnished or your assets seized.
The offer in compromise is the most sought-after solution because it allows citizens to pay less than the original amount. However, it isn’t very accessible because the IRS believes that most people can pay their taxes. Currently Not Collectible status is suitable for people who don’t have any money left over after paying for their basic expenses. It stops collection activities, but the penalties keep accumulating, and most people eventually have to pay their debt.
Louisiana Tax Resolution: What Are My Options?
Although the forgiveness program can’t help reduce what you owe on state taxes, there are other options. Taxpayers can find a solution with the Louisiana Department of Revenue. The easiest option is the payment plan, but there is also an offer in compromise. Penalties can be waived under certain circumstances.
If you’re struggling with your state or federal taxes, reach out to a Louisiana tax specialist. They can analyze your situation to determine which debt you need to prioritize and which forgiveness option is best for your situation.
Offer in Compromise
Taxpayers who believe that they have been charged too much can make the Louisiana Department of Revenue an offer in compromise. The DoR might accept less if they believe that there has been a mistake, the taxpayer genuinely can’t pay, or the collection activities would cost more than the outstanding amount.
Most OICs don’t get accepted, so it’s important to get help from a professional. Your tax resolution specialist will analyze your situation and determine whether you are a good candidate. If so, they will help you to collect the necessary evidence and fill out the correct forms.
Interest and penalties are added to your account if you don’t pay your state taxes on time. In Louisiana, the interest rate is subject to change annually. In addition to interest, you pay a fixed penalty. This amounts to 5% of your bill for every month you don’t file or 0.5% of your bill for every month you don’t pay. Your penalty won’t exceed 25% of the bill, but interest continues to accumulate until you pay.
As you can see, the penalties can add a significant amount to your state tax bill. Fortunately, you can have them removed by making a notarized request in writing. Your request will likely get accepted if you’ve filed all outstanding returns and paid your other state tax bills.
A Payment Plan
If you’ll be able to pay your state taxes but need more time, request a payment plan. This is similar to the installment agreement offered by the IRS forgiveness program, and it is available to both individuals and businesses. You start by filling out a form and submitting it to the Louisiana Department of Revenue. If you don’t have a lot of debt, you might also be able to apply online or over the phone.
Most agreements last between six and thirty-six months. People who need more than three years to pay their bills need to contact a Louisiana tax resolution professional and discuss their options. Sometimes, a 20% down payment is required, but businesses can often set up a payment plan for the entire outstanding balance.
What Are the Consequences of Not Paying State Taxes?
Fees and penalties are only one of the consequences of not paying your state taxes on time. If you run a business and have more than $1,000 in debt, the DoR can refuse to renew your license or revoke your current one. You might also receive a Cease and Desist Order that prevents you from continuing to trade. Comply with this immediately because you could be prosecuted if you delay.
Another possible consequence is a levy. This can be attached to your property or your bank accounts, and it allows the state to access your assets. You might have to give up a part of your income, savings, or physical property. Preventing a levy from being placed on taxpayers’ assets is a priority for every good tax resolution specialist.
Which Taxes Should I Pay First?
Many advisors suggest that Louisiana residents start by paying their state taxes. This debt is usually smaller, so it’s easier to address. Collection activities are surprisingly aggressive, and the DoR can stop businesses from trading and therefore earning an income. However, it’s important to consider various factors. Sometimes, starting with federal taxes makes sense, especially if the debt is older and the taxpayer is facing significant consequences.
It’s always best to start negotiations with both the IRS and the Louisiana DoR before you’re in trouble. If you’re struggling to come up with a viable strategy, reach out to us now. We’ll help you get in touch with both agencies and figure out a solution. You can almost certainly get an installment agreement or payment plan, and you might even get tax relief or currently not collectible status.
How Can I Prevent Issues in the Future?
A good tax advisor will speak to you about how to prevent future problems. They might go through your income and expenses to determine whether you could make more deductions or claim back expenses to reduce your tax bill. They will also discuss how to budget for your taxes. You might need to set some money aside each month to cover future tax bills.
The IRS forgiveness program helps people who are struggling to pay their federal taxes. However, each state has a separate tax board and its own program for state taxes. In Louisiana, you can make an offer in compromise, set up a payment plan, or ask for your penalties to be removed from your account. Get in touch with us at Geaux Tax Resolution to find out more about Louisiana tax resolution strategies.