“Burying your head in the sand and avoiding mounting tax debts could plunge you into more difficulties”, disclosed corporate accountant Pauline Ho founder of Laus Consulting Services LLC in Orlando, FL —
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Ho revealed the best options to a person to manage their debts in the new ‘normal’ world emerging from pandemic lockdowns.
“A debt is a debt, and it needs to be repaid, so the best advice is to tackle the problem head-on. Leaving the debt unchecked means a bigger problem in the future,” said Ho.
Ho advises completing current tax returns and seeking to develop longer-term payback options to eradicate back tax debts.
Leaving taxes unpaid can potentially accumulate overtime in fines and charges and lead to the IRS seeking to seize your property and assets in a bid to recoup the debts.
Ho advises seeking helpful advice from an experienced accountant who can assess your debts calmly and figure out a way forward.
Options for a business owner can include taking out a bank loan to cover the debt as the interest is likely to be much lower than the IRS rate of 0.5% per month charged on unpaid tax.
Another way forward is to lean on a retirement account or qualified pension plan to meet the debt and repay the account over time. Rather than pay the debt off straight away, a taxpayer can take the IRS’ 72-month window to complete the debt.
Others in deeper debt should consider an offer to compromise with the IRS in which they can argue to seek a reduction in the amount owed. However, that option can offer slim pickings, given the IRS accepted less than 18,000 pleas out of 54,225 offers in 2019.
Ho said that this would be based on the amount of disposable income available to an individual, and how much equity and assets come into play.
She concluded: “Time really is of the essence as the lockdowns ease, the pandemic shrinks back, and society starts getting back to normal. Debt won’t go away until you are prepared to deal with it, and to own the situation.”
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