It's the taxpayer's worst nightmare-being faced with huge back taxes with the IRS on your tail. Couple that with tough economic times that Americans have been facing for a while now, and it's not hard to see yourself drowning in debt. This is a distressing situation that many taxpayers face, with seemingly no relief in sight to get themselves out of mounting tax debt. Luckily, there are ways to both get out of such debt and avoid it altogether. Here are the top tips to help you avoid major tax debt in 2014.
The IRS is serious about penalties they issue on those who fail to pay their taxes. In fact, taxpayers who don't pay their taxes and allow tax debt to mount are considered to be criminals, and are punished with hefty consequences, including massive fines and even jail time. This is why it's imperative to file your income tax returns on time every year. Even people who don't have enough money to pay their income taxes should still find some way to file their return on time, considering the fact that the penalties issued for not paying the IRS are a lot less than penalties given for not filing at all.
Major life changes are pretty common for many Americans. Getting married, getting divorced, having children, or relocating to another state are big changes in a person's life that need to be reflected and adjusted on their W-2. Such adjustments are important in order for the appropriate and accurate amount of taxes to be withheld every month. Such tax withholding prevents taxpayers from being slapped with a huge tax bill at the end of the year. Saving money is also possible throughout the year by withholding more than required.
Organization is a critical tool when it comes to having a handle on your taxes. If the IRS decides to audit you, you'll be responsible for providing them with at least three years of your financial records. In addition, people who are in debt and require a settlement plan must submit financial documentation in order to get approved. Keeping your financial and tax information organized is essential for avoiding tax debt in the future.
A great way to avoid tax debt is to deal with a tax preparer with plenty of experience; it should also be someone you can trust. Any financial surprises and tax debt can be eliminated if you deal with a reliable tax preparer who can advise you on the implications of the financial choices you make. Using the same expert year after year is a wise idea, and can even lessen your chances of having your tax identity stolen.
Income tax debt is a really difficult situation to be in. It can be very stressful to have to deal directly with the IRS when you are in arrears with your taxes. Follow the above tips to make sure you avoid any tax debt this year. If you do find yourself in a position where your tax debt is mounting, you can always call upon professionals in debt relief to help you manage your tax problems.