In this economy, job loss and unemployment hit close to home for many- especially in Oklahoma. That loss of income can create a hardship on a taxpayer, potentially resulting in a tax problem. It can also create even more of a hardship on a taxpayer that already has a tax problem. Today I am going to explain what to do if either one of these situations apply to you.
Many people who have lost their job seek unemployment benefits. While this is helpful in the short-term, if employment is not obtained within a certain amount of time, the benefits cease...and no matter what- any unemployment benefits received are taxable. This can put a taxpayer in a tough situation: how is an unemployed person to pay taxes on unemployment income? This is another one of the many IRS laws that does not make much sense. The best thing to do is file your return. Even if you can't pay what is owed. You should seek out a local, licensed, lawyer while times are tough. A licensed professional who deals with IRS collection on a daily basis should be able to keep the IRS at bay until you get on your feet again.
Another common scenario is when a person already owes back taxes and then loses their job. If on a payment plan with the IRS, this can create some serious issues as he will likely default on the installment agreement due to a financial inability to pay. When an installment agreement is defaulted, the IRS collection computers will send the taxpayer a Notice of Intent to Levy. These computers do not care if you lose your job, nor do many employees at the IRS care for that matter...they just want their money. If you have defaulted on an installment agreement, you should seek a tax professional's help immediately. You need a tax professional experienced in IRS collection representation, as many proclaimed tax professionals only prepare returns and are not familiar with IRS collection laws (two different ball games).