Avoiding a Tax Lein. If you file your taxes, you can work out a payment plan with the IRS and/or state taxing entity to pay off that tax debt. Believe it or not, but the IRS is typically much, much easier to deal with than the state taxing entities when it comes to tax debt.
Once you have determined the amount of the tax debt (by filing your tax return), the task then becomes figuring out how to pay the tax debt. The IRS will normally set up a payment plan for you with no penalties and no or minimal interest (like 3% per year). If you make payments successfully, then you’ve dealt with your tax problem with minimal pain. On the other hand, if you don’t file your return, you make it hard on the IRS to deal with you. Consequently, the IRS will make life hard on you in return – assessments of large tax debt, high interest rate charged on the assessed debt and penalties will be charged. If they aren’t getting anywhere with you, tax liens will be sure follow shortly. So, file the tax return, determine the correct tax debt and work with the IRS to resolve the debt.
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