When you are in the tax collection process, it is anything but fun. It puts a serious strain on your finances and adds a lot of stress into an already very stressful situation. During the collection process, the IRS will determine how much money it will take out of your wages, leaving you with a smaller budget.
The problem is that this equation may not factor in all of your monthly expenditures. As a result you may be forced into some serious issues like being able to afford your mortgage or buy everyday items. This guide will help you understand how to remedy this problem to make it much more bearable.
Where It Can Be a Serious Problem
The IRS makes its estimate for allowable living expenses based on census data from your region. It averages all of the general costs such as mortgage and rent payments, utility bills, car payments and so on. From here it will decide how much of your salary can be garnished for your tax payments.
This is especially problematic for people who live in more affluent areas. Let’s say you live in a nicer town in your county where rent and other costs are a little higher than other places. If you take the average monthly cost per person in the county, it will be much lower than your necessary expenses leaving a serious gap between what you can actually afford and what you have to pay.
Tax Resolution Option: Installment Agreement
Normally, you have six years to pay off an IRS debt. Usually, you set up a payment plan and work off your debt over a period of time. However, when people are in collections they may often be unemployed or just in a difficult financial position.
If you really have no ability to pay the IRS, and particularly have additional expenses that you cannot cover then may one to look at the installment agreement option. In this case, you agree to a smaller payment plan for a period of usually one year so that you can have time to adjust your budget and finances so that you are in a better position to repay your debt later. You still have to repay everything, but this will give you the time needed to get yourself organized again.
Get the Help You Need
The reality of the collection process is that there is often just not enough money to go around for all of the things that you have to pay for on a monthly basis. In a couple ways, this is good because it forces people to take a hard look at their finances and get them in order.
It may be a strong approach, but in the long run, it will help you learn the skills you need so you do not fall into this situation again. For now, the best thing you can do is contact a tax professional who can help you structure a payment plan the works for you. With this, you can be sure that you are on the road back to financial stability.
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