One thing we all have to understand is that your tax debt will never just magically go away. If you have a tax problem, seek help early while it is still manageable. Otherwise, the Internal Revenue Service (IRS) will take strong action against you. Under most circumstances, it is never too late to seek help with your tax problems. However, there are certain situations where procrastination can land you in much bigger problems than you probably deserve.
Bankruptcy
One of the most common times when it is almost impossible to get any meaningful help is after you have been served with Internal Revenue Department (IRD) bankruptcy proceedings. This means the IRS will start attaching your assets and making collections on all your earnings and property. At this point, it is well nigh impossible to begin any negotiations with the IRS on the settlement of your tax debts.
Liquidation
If your firm is already undergoing liquidation, there is very little a tax attorney can do to negotiate favorable tax settlement terms. Nevertheless, if you hire your tax attorney early in the liquidation process, s/he might be able to salvage some of your financial assets by negotiating for an offer in compromise, abatement, partial installment payment, or even classify your tax debt as currently not collectible.
Debt Recovery
If debt recovery proceedings have been instituted against you, a tax attorney may still be able to negotiate with the IRS on your behalf. However, you should not make any further delays as it may be impossible to help you once your assets have been attached. If you get your help early, it is possible to receive a tax settlement such as an offer in compromise through negotiations between your tax attorney and the IRS.
Borrowing from IRAs
If you pull some money out of your retirement plan or Individual Retirement Arrangement (IRA), you may face hefty penalties that may eventually sink you into further debt. You need to consult a tax attorney or tax accountant before rather than after withdrawing or borrowing out of your 401(K) or other tax qualified pension plan.
After Marriage
Couples considering the life-long commitment of weddings should take time to discuss finances and other such unromantic issues before saying “I do”. If you get married without consulting a tax expert it may cost you much and you are likely to fail in taking advantage of the various deductions and benefits available for married couples. Once the financial year is over and you have both filed your returns. It may be difficult to negotiate with the IRS on tax refunds. Nevertheless, do not despair. It is never too late to consult a tax professional no matter how many years have passed since the wedding. Your tax attorney could help you map out a more family-friendly taxation plan.
At Last
You cannot wish away your tax obligations and hope they disappear. You need to take timely action to secure any tax refunds due to you or take advantage of more suitable options that will not leave you in financial hardship.
About the Author: Martin Kane has worked in financial consultancy for the past 13 years. In his earlier years, right after graduating from college with a Finance Degree, Martin got his first job with a local bank and had a 6 year stint in the banking sector before he moved to financial consultancy.
