Taxes, another debt that many Americans are struggling with is often going unpaid as taxpayers struggle with foreclosure and other financial crises. But the IRS offers “guidance” on the tax burdens of economic hardship in an article in the Star-Telegram.
Let’s take a look at a few tips:
What if I lose my job?
Severance pay and unemployment compensation are taxable. Payments for any accumulated vacation or sick time also are taxable. You should ensure that enough taxes are withheld from these payments, or make estimated payments to avoid a big bill at tax time. Public assistance and food stamps are not taxable.
Public assistance and food stamps are not taxable? Great! But we don’t want to get to that point. That’s why we use bankruptcy to SAVE our assets so that we don’t become dependent on public assistance and food stamps during hard times if we can avoid it.
What the IRS doesn’t tell you is that you can discharge and/or repay tax debt through bankruptcy without destroying all of your assets. If you have experienced a job loss and you know that you have a large tax bill coming, speak with a bankruptcy attorney immediately. The IRS has massive powers and bankruptcy can help you protect your assets during economic hardship.
What if I can’t pay my taxes?
If you cannot pay the full amount you owe by the April deadline, file your return by the deadline and pay as much as you can to avoid penalties and interest. Also contact the IRS at 1-800-829-1040 to discuss payment options. The agency may be able to provide some relief, such as a short-term extension, installment agreement or offer in compromise. In some cases, the agency may be able to waive penalties. However, it will not waive interest charges that accrue on unpaid tax bills.
You can also receive relief from tax bills in bankruptcy if you meet the qualifications. Bankruptcy is a powerful tool in repaying, reducing or discharging taxes that you are unable to pay due to real economic hardship. When experiencing a job loss or other economic hardship, a debtor must consider all of the debt owed, not just taxes. Bankruptcy can help a debtor repay or discharge his/her debt, including taxes in bankruptcy.