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Different Types Of Tax Debt

February 8th

Not all tax debts are the same, which means that different types of tax debt are resolved differently.   While most people look for ways to resolve their debts directly with the tax assessor, there are certain programs available to help those who cannot afford to repay their debts in one lump sum.

Resolving Tax Debt

Income tax debts are the most common type among taxpayers. They arise from large tax liability burdens and foreseen circumstances. While most people assume tax debts are not eligible for bankruptcy protection, some income tax debts may actually qualify.

In general, tax debts must meet the following conditions in order to be eligible for a debt discharge: (a) older than three years, (b) have a corresponding tax return filed with the IRS and (c) not be associated with fraud. The IRS also offers for taxpayers to resolve their debts through an installment plan or Offer in Compromise. These programs are used to help taxpayers that cannot afford to repay their debts quickly or in one payment.

Business tax debts, such as past due payroll taxes, are different than income taxes. Because these debts are important for maintaining business operations, owing the IRS business taxes can put the future of the company at risk. Tax liens, wage garnishments and seizure of operations are all steep consequences associated with business tax debts. However, the IRS does offer ways for businesses to get caught up on their tax debts and remain without consequences. Business owners may be able to negotiate a payment arrangement directly with the IRS.

Property taxes are also a cause for concern among taxpayers. Unlike personal taxes, back due property taxes can lead to liens against the property and, in some cases, foreclosure. Homeowners who are significantly delinquent on their property taxes may find that their homes are at risk of seizure. However, most property tax assessors also offer tax repayment programs that help the homeowner get caught up over a series of smaller payments.


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