The Backbone of Corporate America…Call center jobs are still one of the major sources of employment for non-college Americans despite many companies outsourcing those jobs. The jobs pay well enough for even a single mother to keep on top of her finances. Also many employees at these companies have 401ks and those are where problems with the IRS can arise.
Investing for your future…The 401k is meant to be saved for retirement, but every year countless people take early withdrawal from their 401k to pay for emergencies that have occurred to them. One of the biggest misconceptions is that when you withdraw from your 401k the IRS automatically takes your taxes out. The fact is that they don’t. You are expected to set aside about 30% of the total amount withdrawn for the IRS share.
A call center service associate can find a sudden https://www.taxhardshipcenter.com/ IRS debt of $10,000-$20,000 impossible to pay off; especially if they have a mortgage and kids.
So what can you do if you owe money to the IRS from a 401k withdrawal? There are a couple of options available to you depending on your financial situation.
Too much to handle…If you’re in a tight financial situation, you have no hope of ever paying back the loan in full and you don’t have equity in anything like a house or car; you could be eligible for an Offer in Compromise. An Offer in Compromise is where you can settle your IRS tax debt for a single lesser payment. However that 401k withdrawal could mess your chances for an Offer up.
Make your case…If you needed the 401k money for a hardship such as medical expenses, school tuition, etc… it doesn’t count as income to determine your financial status for the Offer in Compromise. However if you blew them money on luxury items, or a vacation the amount withdrawn does count as income and it’s likely the Offer in Compromise will be denied. After all, only 2% of all Offers in Compromise actually get accepted.
Another Option…Maybe you can’t qualify for an Offer in Compromise. Your other option is that you can enter into an Installment Agreement where you pay a monthly sum to the IRS. The IRS determines how much you should pay based on your take home income minus essential expenses. The remaining amount is yours, the rest the IRS expects you to pay.
Of course you could always do nothing and wait for the IRS to put a lien on your credit, levy your wages or bank account, or even seize your assets.