Everyone can make small errors in judgment that turn out to have drastic consequences. Unfortunately, if you allow your taxes to accrue every year, you can end up in what is called a “tax debt cycle.” This cycle, also known as pyramiding, can feel like a never-ending trap of paying tax debt. People try to settle their old taxes, and in turn, can’t afford the current year’s taxes, allowing the problem to continue year after year. This can happen with either personal income taxes or business employment taxes. Unfortunately, there can be severe consequences for not paying taxes, so it’s essential to get out of this tax debt cycle as quickly as possible.
Below are some tips that can help break the tax debt cycle.
First, you want to start preparing for what you’re going to owe on this year’s taxes. Make estimated tax payments toward the current year or business quarter you’re in. You can use a free income tax calculator to determine a rough estimation of how much you will owe. Then, every paycheck, put aside the percentage that would correlate with your taxes, or as much as you possibly can. You can set the money in your IRS account, so when you file the tax return, you’ll be all caught up on the current year’s taxes.
This might sound like the last piece of advice you were going to get, but it’s essential to hold off on paying your old tax debt. First, paying off the old tax debt and not having enough for this year’s taxes will only continue the cycle. Second, the IRS has some relief programs available to taxpayers that you might be able to take advantage of. To do so, you will need to show the IRS that you’ve broken your debt cycle, and you’re going to pay on time from now on. As a result, they’ll want to see you’re paying your current year’s taxes first.
Speak to a professional for IRS tax help before taking any actions to ensure you’re putting yourself in the best position. These tax relief programs can cut your debt owed significantly if you know how to qualify and apply. For optimal results, you’ll want to seek a tax attorney consultation in Salt Lake City. A professional tax attorney can help you negotiate a lower tax debt settlement with the IRS.
We specialize in helping clients, both individuals and businesses, who owe the IRS or Utah State approximately $10,000 or more in back taxes. We evaluate your exact position with either or both of those agencies and develop a plan to fix the problem. Book a consultation with us, and we will take you through our simple three-step process: initial consultation, tax analysis investigation and review, and resolution. You don’t have to go through this process alone; leverage our expertise to save you money and get out of the tax debt cycle as quickly as possible!