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Handling tax debts

Taxpayers in Georgia who have a balance when they complete their returns are not alone. The Internal Revenue Service reports that more than 18 million people in the country owed federal taxes in September 2014. Annually, around 10 million people have to pay tax penalties.

However, people who owe federal taxes do have options. There are certain steps they can take to reduce their tax penalties and resolve their tax liabilities.

Whether or not they are able to pay the balance due, it is important that taxpayers file their returns. Simply ignoring their taxes can worsen their liability. If a return is not filed by deadline, a penalty of 5 percent of the unpaid taxes is assessed each month, up to 25 percent of the tax balance. An extension can be filed to allow more time to submit the return, but in order to avoid penalties and interest, every effort should be made to pay as much of the taxes as possible by the filing deadline.

For people who are unable to pay the full amount of their taxes within 120 days, there are payment options. Individuals can request an installment agreement or long-term payment plan. Penalties and interest will still be assessed, and only people whose tax, penalty and interest liability is under $50,000 are eligible to use this option.

A temporary delay in payment may be granted for a tax debt if the taxpayer can verify that they would be unable to pay basic living expenses if they had to pay the debt at that time. It is important to keep in mind that the debt will still be due.

An attorney who practices tax law may serve as a client's representative in disputes with the IRS. An attorney may be able to assist clients with interpreting complicated tax laws.

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