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What to Do in Case of an Economic Downturn #3: Tax Issues

August 25th

For many individuals, it can be difficult to meet tax obligations or settle back taxes under the current economic climate. The IRS has provided a list of possible hardships taxpayers might face in trying to meet their obligations, as well as tips for how to deal with such situations on your tax return.

1. Trouble Paying Taxes. This is, in essence, the biggest tax-related worry facing Americans at present. If this happens, it is important not to panic. If you cannot pay the full amount, just ensure that you still file your return by the deadline and pay as much as possible to avoid penalties and interest. You also ought to contact the IRS directly to discuss payment options.

2. Trouble Meeting an Instalment Agreement. There are several options available for those whose pay has changed, leaving them unable to make payments on an instalment agreement or offer in compromise agreement with the IRS. If this happens, contact the IRS immediately for assistance. Options could include reducing the monthly payment to reflect your current financial status. Be aware, in order to process changes such as these, you may be asked to provide proof of changes in your financial situation or, at least, have that information readily available.

3. A Federal Tax Lien is placed on your home. If there is a federal tax lien on your home, it must be satisfied before you can sell or refinance the property. There are a number of options available for satisfying a tax lien. Normally, if you have equity in your property, the tax lien is paid out of the sales proceeds at the time of closing. However, if the home is being sold for less than the tax lien amount, the taxpayer may request that the IRS discharge the lien to allow for the completion of the sale. Taxpayers or lenders can also ask that a federal tax lien be made secondary to the lending institution’s lien to allow for the refinancing or restructuring of a mortgage.

 

 
 
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