With rise in your tax debt problems your personal problems also tend to increase. There are a number of personal problems that act as the major reason behind tax debt problems. Some of these are accidents, failure of a business venture, divorces and many more. Many of these may be emergencies that you had not thought of previously.
If you are looking out for emotional touch or understanding from the IRS auditors, you are making a mistake! It is the job of the IRS auditors to maintain strictness with regard to the tax laws. However there are certain personal problems that you can mention if you want to convince your auditors about allowing some amount of tax debt relief. Some of these are:
• Loss of Job: There have been a number of changes regarding the job market in the last two years. In order to bring some stability to the various job market issues, the IRS has taken some important steps. Special attention has been given to cases relating to prolonged unemployment. If as a taxpayer you can convince the IRS about your unemployment, you can look for reductions or flexibility in the payment plans including low monthly payments or even temporary change in the tax debt policies.
• Health Issues: Tax problems can also be due to Health issues. You may face an accident or may be a victim of severe health problems. There may be circumstances where even after knowing that withdrawing 401K to pay medical bill is taxable, you just could not manage to do that on time. Make sure that you inform your tax professional about the reasons of your financial ups and downs.
• Home Foreclosure: If you lose out on the basic aspects of living like that of your home it can be very difficult. It can affect your job, your family, and your income tax condition. If your house has been foreclosed you may receive a 1099-A or 1099-C form from your previous lender. Usually the amount on the form is huge and you may face problems in paying them. Thus if your tax debt is related to foreclosure, inform your IRS Auditor beforehand.
• Divorce: If your marriage is not working properly and you want to get some compensation to that, IRS can provide you with some relief. The "Innocent Spouse Rule," can help you to tackle your tax problems relating to your spouse's tax debt in a better way. But for getting the relief you need to qualify first. Moreover as the IRS rules for Innocent Spouse Relief are quite strict it is better that you work with a tax debt professional so you can qualify easily.
• Collapse of Business: If there are any failures regarding business, it can get really difficult. Whenever there is any business failures the business owners face major tax issues. If there are unpaid payroll taxes, it can result in huge tax liabilities for insolvent business owners who may find it difficult to pay them. However you can delay the payment to your creditors but make sure that you pay off the IRS.
The best way to deal with your tax problem while coping up with tax audit is to be honest in mentioning these details. If you can detail out the problems regarding how you incurred your tax debts, your IRS auditor and your tax professional can understand them in a better way. Honesty is the best policy when it comes to tax audit.