Tax Debt in Bethesda
& Finding a Tax Debt Lawyer
When an individual, family, or business fails to pay their taxes on time, they accrue tax debt. As these taxes remain unpaid, the IRS adds penalties and interest payments that increase the amount owed. Tax debt can easily get out of control if not promptly addressed.
Filing one’s taxes on time is not a guaranteed way to avoid tax debt. If a taxpayer leaves any part of their taxes unpaid by the due date, the IRS will begin collection efforts right away. If you live in Bethesda, Maryland and are experiencing tax debt, you should understand a few key things about the situation.
Maryland Tax Debt Penalties and Interest
The average tax debt penalty is 0.5% of the overdue amount. This percentage may increase to up to 25%. The IRS compounds this penalty monthly.
In addition to penalties, the IRS can add interest to any unpaid amount. Any penalties that have been levied are included in the original amount, meaning that the taxpayer must pay interest on the penalties as well as what they owe for taxes. Therefore, it is in your best financial interest to resolve any tax debt quickly and efficiently.
IRS Tax Debt Collection in Maryland
When the IRS identifies tax debt, they send the taxpayer a determination of their tax liability. This is a statement of how much you owe and how you can submit your payment. Unfortunately, the IRS does not take any tax credits into account, so the amount that they declare that you owe may not be accurate. In order to take advantage of tax credit programs with tax debt, you need to contact a tax attorney.
If the Maryland IRS does not receive payment after initial notifications, it will move to seize assets and property. This usually begins with wage garnishments, financial account levies, tax liens, etc. If the amount is over $51,000 and the IRS has attempted to use a tax lien or levy to recover the money, the agency will limit your passport privileges. This means you will face an inability to renew your passport and will not be permitted to travel out of the country until the tax debt is resolved.
Remember, the IRS will only contact you initially via mail. Therefore, do not trust any phone calls or emails you receive about your tax debt.
How to Resolve Tax Debt
There are ways to resolve your tax debt and avoid additional fees and punishments in Bethesda, Maryland. The simplest way is to pay your tax debt in a lump sum. However, this is not financially possible in all situations.
A repayment plan may be appropriate in situations where paying a lump sum is not possible. You can negotiate the terms of your repayment plan with the IRS, which helps you to avoid further harassment or action. However, you may still be responsible for interest and penalty payments while you have an outstanding balance.
As a last resort, you may be able to resolve your tax debt by filing for bankruptcy. Though this route may help to resolve your tax debt issue with the IRS, it creates a host of other issues and penalties. Your credit score will suffer, and you can lose major assets like your home, car, and personal items. Consider bankruptcy if you have worked with a tax attorney and explored all other options.
Avoid Maryland Tax Debt Relief Companies
Tax debt relief companies claim to help individuals with tax debt but end up costing them more. These companies have high employee turnarounds and frequently go out of business, making them extremely difficult to work with. In addition, they will levy hidden charges and fees that can cost more than your tax debt. The aim of these organizations is to take money from taxpayers without providing a real service.
If you are considering one of these companies, opt to work with a tax lawyer instead.
Delia Law Can Help With Tax Debt in Bethesda, MD
Our team at Delia Law is here to help you with your Maryland tax debt issues. With many years of experience in tax law, we have a thorough understanding of how to navigate tax debt. We offer our clients reliable, trustworthy legal services for all tax issues, complete with the client-lawyer privilege to keep any confidential information away from the IRS.
Why You Should Always Consider Hiring a Tax Lawyer
Tax debt can cause serious problems for you and your family. However, when you work with a tax attorney, you have an advocate who understands the system and who can work to help you through this financial obstacle. Whether you need help communicating with the IRS or filling out applications and documents, a tax attorney provides key services that can minimize the damage that your tax debt creates.
Many people do not receive the tax help they need because they complete paperwork incorrectly, miss deadlines, or make mistakes. When you have a tax attorney, you avoid key errors that can create further issues with the IRS.
For more information, contact Delia Law at our Bethesda, Maryland office.
Maryland-Specific Tax Laws
Maryland has a progressive tax system, which means the higher an individual’s income is, the higher the percentage they will pay in taxes. Maryland has special tax benefits for military retirees, lower income families, those paying for childcare, as well as for those aged 65 and older.
There are four types of taxes in Maryland:
- State income tax. The state tax rate for personal income tax begins at 2%. This is applied to anyone making under $1,000 per year in annual income. It increases up to 5.75% for anyone making over $250,000 annually. This is one of the lower state income tax rates in the United States.
- Local income tax. There is also a local income tax, which is levied by counties and cities. For convenience, these are withheld during income tax season by the state, and they vary based on the locality. For example, if you live in Allegany County, you paid a .0305 tax rate in 2021. This differs from residents of Baltimore County, who had a .0320 rate. It is important to note that this income is based on the county you live in, not where you work.
- Sales tax. With each purchase in Maryland of a good or service, a 6% sales tax is automatically applied. This does not include every purchase. Groceries, prescription drugs, and gasoline are a few examples of items not subject to sales tax. However, a business is required to collect a 9% tax on any alcoholic beverages sold.
- Property tax. You must pay property taxes in Maryland as well, and the tax rates vary by county. The average effective tax rate is 1.06%. While this might seem low, it is balanced by the high property values in the state. The median home value in Maryland is currently over $400,000 and varies based on proximity to the city of Maryland and other populated areas.