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Michigan Tax Relief Services for State and Federal Tax Debt
When you find yourself in tax debt, it’s easy to feel overwhelmed—and alone. But the fact is that millions of Americans, including many Michigan residents, fall behind on their taxes each year. This is a very common problem, and you should feel comfortable asking for help when you need it. That help comes in the form of tax relief services.
There are many Michigan tax relief solutions available to taxpayers like you, but navigating the options and finding the best solution for your current situation can be confusing. At W Tax Group, we are committed to helping people get back on track with their taxes and discover the best tax relief option for their needs.
Learn more about your options and start planning for the future by calling us at 877-500-4930. You can set up a tax attorney free consultation to figure out your next steps.
What Are Tax Relief Services?
Tax relief services are when you work with a tax attorney or another tax professional to solve your tax debt. The attorney helps you get back into compliance with the IRS or the state revenue agency. To do so, they may help you set up payment plans, request penalty abatement, apply for settlements, or explore other relief options. A quality tax relief attorney will learn about your problem and help you find the best solution for your unique personal and financial situation.
Finding the Right Federal Tax Solution for Your Needs
If you’ve fallen behind on your federal taxes, don’t count on the IRS never finding out. While they don’t catch every taxpayer the moment they stop filing or paying taxes, they do eventually identify non-payers and non-filers. When they do, the penalties and interest pile up quickly, and you risk losing your assets and income to levies, liens, and wage garnishments.
Instead of waiting for the IRS to contact you about your past-due taxes or ignoring the notices they send you, take action and start looking into tax relief options. The IRS wants to collect what they are owed, but they also want to accommodate taxpayers who have fallen on hard times so they offer a lot of different payment plans and relief options. By exploring these options early with an attorney tax relief service, you can protect your assets and get caught up on your taxes.
Installment Agreements
Perhaps the most common and easily available option for taxpayers is an installment agreement. This takes your amount due and spreads it over a period of time, making your payments much smaller.
Long-term payment plans last up to 72 months, and if you owe $50,000 or less in taxes, interest, and penalties, you can apply online. You must apply over the phone or through the mail if you owe more, and in that case, you may also need to submit a financial statement.
To qualify for this option, you must have filed all of your required returns. Depending on the amount you owe, you may also be required to agree to a direct debit payment plan, rather than making payments manually each month.
One of the biggest pitfalls to watch out for with an installment agreement is an unreasonable monthly payment amount. Many taxpayers, relieved at the thought of getting the IRS off of their back, commit to a monthly payment that is just a little bit out of reach. They assume that it’s still better than owing tens of thousands of dollars. But in truth, if you fall behind on an installment agreement, the IRS can cancel it and demand full payment immediately. It’s best to commit only to a payment you can comfortably make every month.
Offer in Compromise
An offer in compromise can help you pay off your tax debt for less than you currently owe. It’s a good option for taxpayers who cannot pay their full tax debt without facing significant financial hardship. Remember, the IRS isn’t trying to bankrupt anyone or leave them without money to put food on the table; they do want taxpayers to maintain a reasonable standard of living.
When you submit an offer in compromise, you provide in-depth information on your finances. This includes documentation of all income sources, assets, equity in your assets, debts, and monthly expenses. You then make an offer of what you are willing to pay—either in one lump sum or spread out over multiple payments.
If the amount is equal to or greater than what the IRS already believes it can reasonably collect from you, they will accept your offer. If not, they will give you a chance to revise your offer to a higher number.
Penalty Abatement
Penalties can make up a significant portion of your tax debt, particularly if your tax debt has been accruing for some time and you’ve incurred monthly penalties for failure to pay or file. The IRS will remove penalties under limited circumstances. They are most likely to remove penalties if this is the first time you’ve made mistakes in your tax filings or if you genuinely had a good reason to believe you did not have to file or pay. The IRS looks at the facts of your case, considers your reasoning for not filing or paying, and ultimately decides whether or not to remove the penalties from your bill.
If you choose to pursue penalty abatement, you want to make the strongest case possible to the IRS. Don’t provide extra information that clutters up your application, but do provide all of the relevant facts and details that support your claim.
Currently Not Collectible
You may request the IRS to put you on “currently not collectible” status. This is a temporary solution for your tax debt, as it means that the IRS has looked into your financial situation and determined that you are currently unable to make any payments toward your tax debt without incurring significant financial hardship. It’s important to note that if you qualify for currently not collectible status, interest and penalties are still assessed. This means that if you do eventually have to pay, you will owe even more than you started with.
If you qualify for currently not collectible status, make sure you are discussing other options with your tax professional. The IRS will periodically reassess your financial situation, and if they believe you are able to resume making payments, they will take you off currently not collectible status. At that point, you will want a plan to tackle your tax debt.
Factors Affecting the Solutions Available to You
There are numerous factors that affect what solutions are suitable for your tax situation, including:
- How much you owe: Certain tax relief solutions have limits as to how much you can owe. Most regular taxpayers fall well below these limits, but it’s worth discussing with a tax attorney in Michigan.
- Why you incurred the tax debt: For example, if you have tax debt because you just fell behind on your filings and did not have the money to pay in full, the IRS will give you more options to pay back what you owe. They aren’t nearly as lenient with tax debt incurred due to fraud.
- Your income and assets: The IRS does take an in-depth look at your financial situation before they agree to certain tax relief options. If you have a high income—which does include your spouse’s income if you file together—or assets with a lot of equity, that will definitely limit the relief options available to you.
- Your tax history: In general, the IRS will consider your overall tax compliance history when determining how to handle your tax debt. You must be caught up on filing old returns before the agency will agree to most relief options.
What Happens if You Do Not Take Action on Your Tax Debt?
A surprising amount of Michigan taxpayers ignore their tax debt, hoping that they can put it off until they are in a better financial situation. However, if you do not communicate with the IRS about your debt, they will begin taking more aggressive collection actions. They can apply any tax refunds you receive to your tax debt.
They can also lay claim to your property with a tax lien or seize assets with a tax levy. If they decide to garnish your wages, you could be left with very little—while the law does put strict limits on how much other collectors can garnish from your income, the IRS can take almost everything.
Once the IRS moves forward with a collection action, it is much harder to turn back the clock and try to secure a fair and reasonable payment solution. It is much better to be proactive about your tax debt, rather than attempt to fix it after the IRS has already started to seize your assets and income.
Solutions for Michigan State Tax Debt
It’s not uncommon to have both federal tax debt and state tax debt. The Michigan Department of Treasury also offers a variety of solutions to help taxpayers catch up on past-due taxes.
Penalty Abatement
The state of Michigan does grant penalty waivers in certain situations. If penalties have been added to your tax bill, you need to request a waiver in writing. Penalties are only waived if you can show reasonable cause for your late or unpaid taxes. Examples given by the Michigan Department of Treasury include a fire or other type of natural disaster, criminal acts against you, and serious illness or death.
Currently Not Collectible
Currently not collectible status is also available for state tax debt. Your debt continues to accrue interest, and once the state finds out you have started to bring in more income, they will pursue other collection options.
Offer in Compromise
One of the unique aspects of Michigan’s offer in compromise program is that it works in tandem with the federal offer in compromise program. If you apply for an offer in compromise for your federal taxes and your application is approved, the Michigan Department of Treasury will give you an offer in compromise matching the percentage of relief granted by the federal government.
Installment Agreement
An installment agreement allows you to spread your state tax debt over a period of up to 48 months. If you need more time to pay off your tax debt, you can request a longer payment plan, but you will need to provide more information on your finances. The state will look at your income and assets, as well as your debts and monthly expenses to determine how much you need to pay your expenses each month. Their goal is to ensure that your installment agreement payment does not leave you with less than that amount.
Consequences of Ignoring Michigan Tax Debt
If you do not pay your taxes, penalties and interest will continue to accrue until you pay your tax debt in full. Penalties can be as high, so it is crucial to address your tax debt immediately. The state will move forward with sending a Letter of Inquiry, a Notice of Intent to Assess, and a Bill for Taxes Due. At that point, if they have not received any communication or payment from you, your account will be forwarded to the Collection Services Bureau.
The Collection Services Bureau uses a variety of collection actions to get what they are owed. They file liens on real and personal property, use tax warrants to seize business and personal property, levy your wages, levy your bank accounts, and offset money owed to you.
As is the case with federal tax debt, waiting until more aggressive collection actions have been taken against you makes it far harder to negotiate how and when you pay your taxes.
How W Tax Group Can Help You Tackle Your Tax Debt Now
At W Tax Group, our team of certified tax resolution specialists is passionate about helping people from all walks of life find relief from their tax issues. Tax issues are all too common, and you don’t deserve to have your life consumed by the constant threat of levies and liens.
By working closely with our tax resolution firm, you can address your Michigan tax debt, your federal tax debt, or both. We genuinely care about our clients’ best interests and peace of mind, and no matter how complex your Michigan tax problems are, we are committed to helping you find a resolution. Set up a time to meet with our team now by calling us at 877-500-4930 or filling out our online contact form to request your free consultation.
