As the nation reels from high unemployment rates, job losses may lead to another perhaps more insidious problem – the IRS.
In this economy, job losses have been spread across the blue collar and white collar spectrum; including construction, manufacturing, retail, automotive, real estate and banking.
As a result, people from all walks of life may find it difficult to pay their taxes. And as IRS penalties and interest charges accumulate, the amount owed may seem insurmountable.
But not all hope is lost. It is possible for a person who finds themselves in this situation to reduce their tax bill, postpone payments or take other actions to avoid further penalties.
If a person finds themselves unemployed, the last thing they should have to deal with is an IRS problem. There are steps a person can take to minimize the risk that the IRS will take severe actions to collect:
Moving? Notify the IRS of the New Address: if a person owes taxes and moves and doesn't notify the IRS, collection letters could be sent to the old address. Months could go by, causing penalties and interest to accrue. This can possibly lead to wage garnishment once the IRS computers pick up on the taxpayer's new location.
Apply for Currently Non-Collectible (CNC) Status: CNC is when the IRS determines that a taxpayer's current financial situation makes it impossible for them to pay their taxes for now. The IRS usually gives the taxpayer some breathing room and reevaluates their situation after 18-24 months. If by that time they are showing positive cash flow, they may be put on a payment plan.
However, there are some pitfalls with the CNC to be aware of. If a taxpayer is declared CNC, it doesn't get them off the hook for paying their taxes in future years. In fact, a person must pay these future taxes in full and on time or they'll blow it big time.
If they neglect to pay the taxes or worse – they don't file, the whole CNC deal is off! If this happens, the IRS will come after all of the money they are owed, and they may use garnishments, levies, seizures, liens and all of the "nasty" tactics at their disposal to get their money.
***Bryson Law Firm, LLC is a Louisiana law firm focusing 100% of our practice on helping people and businesses solve their IRS and Louisiana state tax problems. We have offices throughout the state in Lafayette, Baton Rouge, and Shreveport.**