Have a Tax Question? Ask a Tax Expert
Hello JA Customer,
When you file your tax return next year for the income you earned in 2010, if you have not paid in any or enough taxes to cover what you owe, then the IRS could also charge you interest and penalties due to the underwithholding.
That being the case, you should start having taxes withheld as soon as possible from the remaining paychecks you expect to receive this year. You should also try to make an estimate of what you think your actual tax liability will be for the year, and if the amount to be withheld from your remaining checks will not cover that amount, then you should also send in estimated tax payments for the 3rd and 4th quarters of this year. The more you can afford to pay in now through payroll withholding and estimated payments, the less you will have to pay in interest and penalties.
Hello again JA Customer,
Those ads that you see for reducing your IRS debts to pennies on the dollar are for the most part just a ploy at getting you to pay a fee of $3,500 or more to a company who more than likely will not be able to reduce your tax debt at all.
To reduce a tax debt that you owe to the IRS, you must submit to them what is called an Offer in Compromise (OIC). Very few OIC's are actually ever accepted by the IRS. When an OIC is submitted to the IRS, you must submit to them your complete financial records. They would look at all assets that you own and the amount of your current income. And what limits your ability to be successful with an OIC is the fact that the IRS will also look at your earnings potential for the next 10 years, as this is the length of time they have in which to collect any taxes you owe.
So if you are currently working, they will take in to account not only your current earnings, but will also work under the assumption that you will be able to make that same amount or even more in the next 10 years.
I realize that $10,000 is a lot of money to people like you and I, but quite honestly as far as an IRS tax debt is concerned, that is a relatively small amount in comparison to what other taxpayers owe, and it is extremely unlikely this would qualify for any type of reduction. As long as you are physically able to continue to work, it is not likely that an OIC would even be considered. So I would suggest not throwing another $3,500 of your money away on one of these firms who advertise they can help you in this regard.
If at the end of the year you cannot afford to pay the IRS the entire amount that you owe, you may be eligible to set up an installment payment plan with them to pay off the amount due over a period of time. Once you set up such a payment plan, as long as you stay current on those payments, this would keep the IRS from placing any liens on your properties or from garnishing your wages.