The General Tax Law itself defines the Concept of Debt Article 58.1 says that “it will be made up of the quota or amount to be paid that results from the main tax obligation or the obligations to make payments on account.”

Therefore, we find two types of assumptions. On the one hand, we have the fee to be paid as a consequence of the main tax obligation, which is the one originated by the realization of the taxable event. But, on the other, are also tax debts related to payments on account, that is, withholdings, installment payments, or payments on account.

 

What other additional concepts does the tax debt include?

First, tax debt includes default interests. These are amounts that must be paid, for example, if we make a payment after the deadline, if we make a declaration or self-assessment with the result to be paid after the end of the corresponding term or if we collect a refund that, later, proved to be inadmissible.

Secondly, late tax surcharges are also part of the tax debt. They are amounts that are paid if we make an income after the deadline, but before the Administration has made any request to us. They are paid according to the time elapsed from the end of the term for filing or deposit until we submit the corresponding self-assessment or declaration:

• Within the next three months it is 5% and we would not pay penalties or interest for late payment.
• If more than three months have passed, but less than six, the surcharge amounts to 10%, but neither will penalties or interest for late payment be paid.
• After more than six months, but less than a year, the surcharge is 15%, but neither does it imply paying penalties or interest for late payment.
• After a year, the surcharge is 20%, but there would be no penalties. What would have to be paid is default interest, which would be calculated from the day after one year.

Third, the surcharges for the executive period are part of the tax debt. They arise when we do not pay within the established period. At the end of the voluntary period, if we do not pay, we will receive an injunction. If we enter the amount before they notify us, the surcharge will be 5%. Once received, you will indicate a deadline. If we pay within this period, the surcharge will be 10%. For the end of the term, the surcharge is 20%.

Finally, the last component of the tax debt is the legally required surcharges on the bases or quotas, in favor of the Treasury or other public entities. These are tax cases that are configured as a surcharge on an existing one.

Those that are expressly excluded from the concept of tax debt are penalties. However, regarding their collection, the rules that affect the collection of the tax debt are applied.

3. How is the tax debt extinguished?

 

The General Tax Law itself lists an open list of cases in which the tax debt can be extinguished:

• The payment, which is the most common case.
• The compensation, such as that can be done (if desired) when the statement of income to a spouse finds it an amount to be paid and the other to return.
• The cases of remission, which are very exceptional and that, in any case, must be made through a law.
• When it is extinguished through the means provided in customs regulations.
• The prescription, which we discuss later.
• The other means provided by law.

4. How does the prescription of the tax debt work?

After four years, two important rights that the Tax Administration has in relation to tax debts prescribe:

• The one to determine its amount by means of the opportune liquidation fruit, for example, of an inspection or another type of verification or investigation procedure.
• The one to demand its collection, which includes the possibility of initiating the enforcement procedure.

 

The term begins to run at the end of the period we had to voluntarily carry out the corresponding self-assessment, declaration or payment.

However, it can be interrupted in certain circumstances. The most typical case is that related to the initiation of actions that have been formally notified to us, aimed at the recognition, regularization, verification, inspection, assurance and settlement of all or part of the elements of the tax obligation. From that moment, a new term of four years would begin to count.

For every entrepreneur it is important to retain that the concept of tax debt is not equivalent to “debts with the Treasury”. In this way, mistakes are avoided in the exercise of rights, the fulfillment of obligations and, in general, in the analysis of the impact of taxation on our activities.

 

What you can do

If you don’t file your return, the IRS can impose fines for not filing the return and even a tax lien, in addition to any interest you may owe. “Extending your return does not extend the time you have to pay your taxes. When considering how to pay for them, you can turn to a variety of sources, although they all have advantages and disadvantages:

• Extract the funds from your savings. Try to avoid withdrawing dividends from a retirement account, such as your IRA. That will only exacerbate your problems next tax season, when you owe income taxes on the amount withdrawn, plus a 10% penalty if you’re under 59 1/2.
• Use a credit card with an introductory offer of 0% interest. If you can, this option could work much better than using a high-interest credit card you already have in your wallet. Just be sure to pay off your debt before the rate expires.  

Also note that if you are filing electronically, using a credit card may cost you slightly more than paying in cash. The IRS authorizes only a few companies to process credit and debit card payments electronically, and they will charge you credit card processing fees, which this year are up to 1.99% of your balance, with a fee $ 2.50 minimum. For a $ 2,000 tax bill, you would have to pay an additional $ 39 if you pay with a credit card.

• Use a credit card that you already have. You can delay the actual payment by about a month and perhaps earn reward points, but be aware that such a tactic could backfire.

If you cannot pay your credit card bill on time and in full, you will be subject to the card’s annual interest rates.

And if you’re paying taxes with a rewards card, keep in mind that the typical credit card reward is 1%; on a $ 2,000 tax payment, it would be $ 20. If you fall behind on a payment, you will likely eliminate that reward with fines and late fees.

• Ask for a loan with the house as collateral or from a bank. A home equity line of credit, at a much lower interest rate than a credit card, might be an option. But keep in mind that you can no longer deduct the interest on those loans that are not related to the construction, purchase or improvement of your home. You can also get a personal loan from your bank or credit union.