Tax Debt in San Diego
& 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 San Diego, California and are experiencing tax debt, you should understand a few key things about the situation.
California 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 California
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 California 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 San Diego, California. 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 California 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 San Diego, CA
Our team at Delia Law is here to help you with your California 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 San Diego, California office.
California-Specific Tax Laws
California residents are subject to some of the highest taxes in the nation. The same applies to businesses operating in the state or people living outside of California but earning income from the state.
There are four main types of taxes in California:
- State income tax. For state tax in California, the tax rate for those filing as a married couple range from 1% to 12.3%, depending on the income bracket. If you make under $18,650, you are only required to pay 1% of your income in state taxes. However, the other end of the spectrum imposes a 12.3% tax rate on annual salaries of $1,250,739 or higher. There is also a 1% mental health service tax that is imposed on anyone making more than a million dollars a year.
- Local tax. At the local level, the amount you pay locally depends on the county and city in which you reside. There are a total of 58 counties in California, each with its own tax rate. For example, in El Dorado County, the tax rate is 0.25%, while in Orange County, the tax rate is also 0.25%, but with an additional 1.5% added in for local school taxes.
- Corporate tax. The corporate tax rate in California is 8.84%, which is higher than average nationally. These taxes are imposed on the majority of businesses, regardless of whether they are based in California or operate in the state.
Sales tax. In terms of sales tax, there is a statewide rate of 7.25%, which is again higher than average. However, some areas have rates as high as 10%. These taxes are generally imposed on retail items. Residents and shoppers of the state do get relief from sales tax on some essential items, such as no tax on groceries and prescription drugs, as well as reduced tax rates on clothing, prepared food, and over-the-counter medications.