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After the income tax deadline: facing up to tax debt

The overall odds of getting a tax refund are good. Three out of four taxpayers receive one. But the other side of the coin is more challenging. The IRS says that one in every six taxpayers owes money to Uncle Sam.

In Texas and across the country, many taxpayers are now facing the question of how they will pay. After all, the filing deadline for federal income taxes was April 15. It is now passed. And for those who didn't file or didn't pay, sooner or later the IRS tax debt collection apparatus will kick in.

Of course, the reasons for nonpayment vary considerably. For some taxpayers, it's because they are considered self-employed and therefore don't have taxes withheld from their paychecks. Taxpayers in this situation don't always pay enough in estimated taxes throughout the year to be current when April 15 rolls around.

Regardless of the reason for your tax debt, deep down you know it doesn't make sense to put your head in the sand. The IRS has tools to take action to collect the debt, such as through tax liens and wage garnishment. And so it makes to be proactive about payment wherever possible.

Be wary, though, of debt-settlement companies that offer to take care of your tax debt in exchange for an up-front fee. Such companies are notoriously unreliable at actually delivering debt relief. Not only that, they are often untrustworthy or even fraudulent.

Fortunately, there are several legitimate options for resolving tax debt. An installment payment agreement is one. An offer in compromise (OIC) is another. We will discuss both of these options further in upcoming posts.

Source: "Owe taxes? Be your own savior with the IRS," Washington Post, Michelle Singletary, 4-16-13

Please visit our page on tax debt.

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