How to Handle Tax Related Debt Problems
Introduction
Failure to pay your taxes can mean fees and penalties for you. But you can easily avoid this by paying off your tax debt on time. Debt management solutions explain how serious tax debt problems can be and their implications.
Debt Problems and Taxes
Getting out of debt requires strong financial discipline as well as personal will power. According to Federal Reserve statistics, around 45% of American households spend more than their income. So the matter of paying taxes can be well imagined. However, certain types of debt actually facilitate a reduction in taxable income. Experts on debt management solutions can give you a complete picture of the implications of tax problems and also suggest ways you can lower your taxes by using debt to your advantage.
Wage Garnishment
Are you someone who constantly avoids paying taxes? The reasons behind your debt problems may well be justified, but the U.S. Internal Revenue System still has the authority to garnish your wages. Once the judgment is out, 25 percent of your income will automatically go towards your tax debt. The process will continue until that debt is paid off completely.
By Finance Charge
A large amount of credit card debt with high interest rates can earn you a significant amount in finance charges. However, these charges cannot be claimed as a tax deduction except when they are from mortgage loan interest. So this finance charge is not very beneficial for tax debt problems.
Tax Liens
Non-payment of taxes on time can have serious repercussions. The U.S. Internal Revenue Service can slap you with penalties as well as interest on unpaid taxes, and the amount keeps accumulating until you pay it off in its entirety. Debt management solutions agencies even warn against losing your property by non-payment of taxes. The IRS can put tax liens on your personal property. Once a tax lien is filed, it will entitle them to the legal rights on the security interest of your property. If you don’t have enough equity to pay off your mortgage, you could lose your home.
Debt Settlement
Debt settlement is an easy debt management solution that gives you the option to settle for less than the amount you owe to creditors. This also gives you the chance to show the forgiven debt as taxable income when filing your taxes. It’s a good option, but when your debt settlement amount is high, tax deduction can be a matter of concern.
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