Here Are Different Methods To Pay Off Back Taxes
Owing taxes can be stressful especially if you're not able to pay them on time. In most cases, taxpayers would face penalties and interests if they have back taxes. You should still file your tax return even if you can't make payments by the tax deadline date; after that, review your options for how you can pay what you owe to the IRS.
Your unpaid tax debt is also known as “back taxes.” Back taxes are all income taxes owed from prior years that you have not paid by the due date. There are many causes of owing the IRS, including not having enough taxes taken out of your paycheck, or not making required estimated tax payments.
Ways To Manage Your Back Taxes
Delaying your income tax payments, even for just a little while, will only increase the debt as it snowballs with added interest and penalty charges. Here are a couple of options and methods for you to get back on your feet and be compliant with the IRS regarding your tax liabilities.
Agree To A Long-Term Or Short-Term Installment Agreement
The IRS offers two types of Installment Agreements to help you pay off your back taxes. An IA allows taxpayers to pay an agreed-upon amount every month to the IRS. These payments go directly to the taxpayer’s tax debt and continue until the debt is paid in full. The long-term payment plan is for over 120 days and a maximum of $50K in combined taxes, penalties, and interest. The short-term payment plan is for 120 days with a maximum of $100K in combined taxes, penalties, and interest.
Apply For An Offer In Compromise
An Offer In Compromise (OIC) gives taxpayers a chance to make a deal with the IRS and pay less than what they originally owed. To be approved for an OIC is extremely difficult and studies show 3 out of 4 OICs get rejected. Taxpayers who can fully pay the liabilities through an installment agreement or other means, generally won't qualify for an OIC in most cases.
Request A "Currently Not Collectible" Status
Within reason, you can ask the IRS to put your account in what's called "Currently-Not-Collectible" status if you're in a financial bind and are unable to pay your taxes at this time. Just like the Offer In Compromise, the IRS will ask for you to complete Form 433, the Collection Information Statement, and prove your financial status.
Reach Out To Work With A Qualified Tax Resolution Specialist
Taking care of your back tax debt doesn't have to be difficult or frustrating. You can seek the assistance from a professional tax resolution specialist if the thought of dealing with the IRS on your own seems a little intimidating. Your best option is to seek advice from a tax expert who is authorized to represent clients before the IRS.
The IRS Fresh Start Program
The IRS Fresh Start Program consists of 4 main programs that are accessible to taxpayers who owe much more than they can reasonably afford to pay. We've already gone over 3 which were Currently Not Collectible (CNC) Offer In Compromise (OIC), and Installment Agreement (IA). The last program is Penalty Abatement (PA). PA is a term the IRS uses to completely wipe out or reduces a taxpayer's penalty. If you’re like many Americans looking for tax relief, take comfort in the fact that you’re not alone. No matter how much you owe in back taxes, it's always best to qualify for the Fresh Start Program with a tax specialist so they're able to advise you on your assets, liabilities, income, and expenses to help determine whether you qualify for an Offer In Compromise, Installment Agreement, Penalty Abatement, or Currently Not Collectible. These tax experts will help you qualify for the program and help you figure out which options will give you the most suitable outcome.
Resolve Your Tax Bills
If you've found yourself in a nasty mess with the IRS, take a deep breath. For taxpayers who may have difficulty paying off an excessive amount of tax debt, there's a new and improved relief program that consolidates many major relief programs into a one-size-fits-all assistance program. Any issues regarding back taxes, unfiled years, or any other tax-related problems may be solved through one program; the IRS Fresh Start Program!
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