Tax Debt

Tax season can be stressful, and for some, it can lead to the daunting reality of tax debt. This isn’t a problem exclusive to a few; anyone can find themselves owing the IRS or their state taxing authority at some point.

Common Causes of Tax Debt:

• Under-withholding: This is a common culprit. If you don’t withhold enough taxes from your paycheck, you’ll likely owe at tax time. Significant life changes like marriage, divorce, or a new job can impact your withholding requirements.
• Self-employment: Independent contractors and freelancers often face larger tax burdens as they are responsible for paying self-employment taxes, as well as regular income taxes.
• Deductions and Credits: Not taking advantage of all available deductions and credits can lead to a larger tax liability.
• Unforeseen Income: A sudden increase in income, like a bonus or inheritance, can lead to higher taxes.
• Simply Forgetting: Yes, life happens! Sometimes people simply forget to file or pay on time.

Ignoring tax debt is never a good idea. The consequences can include:

• Penalties and Interest: The IRS charges interest and penalties on unpaid taxes, which can quickly compound the debt.
• Liens and Levies: If the debt remains unpaid, the IRS can place a lien on your property, making it difficult to sell or refinance. They can also levy your bank accounts and wages.
• Damaged Credit Score: Unpaid tax debt can negatively impact your credit score, making it harder to secure loans or other financial products.
• Stress and Anxiety: The burden of tax debt can be emotionally draining.

Don’t panic, luckily we are here to help. Give us a call and we can look over all of your options to lower and manage your IRS debt, getting you debt-free.