Thousands of people are unable to pay their tax on time, and many have sleepless nights worrying about going bankrupt, losing their home or job, or even going to prison.

In fact, things may not be as bad as you think, as long as you do not ignore the problem.

The first things to consider are detailed in can't pay your tax and will be helpful in understanding how you can help yourself.

Some practical points
Before looking at tax debt in detail, it is worth considering some practical issues about tax debt and bankruptcy. Individuals who are threatened with bankruptcy or other recovery action by HM Revenue and Customs may be in a very different position from people whose borrowing has got out of control. Some taxpayers face court proceedings or even bankruptcy because they have neglected their tax debt. This may be the result of an illness or other difficulty. Without the information from a tax return, HM Revenue and Customs will decide on a figure for income and tax due to the best of its ability. This figure is called a 'determination'. The determination may well be higher than the taxpayer's actual tax liability. Determinations for subsequent tax years are likely to be higher still. In addition, no allowance will be made for tax paid at source, as may be the case, for example, in the construction industry.

If a taxpayer's affairs are neglected for a number of years, the resulting bill, with interest, penalties and surcharges can easily be enough to result in bankruptcy proceedings. Even though this tax bill is not based on final figures, it is legally due and payable. The only way to replace a determination is for the taxpayer to complete and send in a self assessment tax return. Determinations cannot be challenged in court on the basis that the figure is likely to be inaccurate.

If you've already filed taxes, your tax professional should quickly review those returns to determine if they are accurate and if you were entitled to deductions you overlooked. Amending a return requires a substantial amount of paperwork and reprocessing. Amended returns must be thoroughly accurate with lots of supporting documentation, or else you risk an IRS audit. Generally speaking, you'll want your tax professional to retrieve a complete set of documentation from the IRS and compare that information to the tax documents you already have. After a thorough review of your tax debt, the tax professional will advise you whether it makes sense to file an amendment.

Anyone who is being threatened with court action or bankruptcy in these circumstances should seek professional help as soon as possible. It is quite possible that the tax debt will be reduced to manageable proportions once tax returns have been submitted.

There's no "secret sauce" in paying off tax debts. These are the only five ways of getting out from under the IRS' aggressive debt collection tactics. If a tax pro promises you that you can save "pennies on the dollar" through an offer in compromise, that person is probably more interested in selling you something you don't need instead of focusing on your unique financial situation and determining what the best course of action is for you.