If you need to settle back taxes with the IRS, you're not alone. Millions of people owe back taxes, and, like you, many of them live in fear of the repercussions. The first step you can take to settle back taxes is contacting the IRS before they contact you. Many people believe that is impossible to negotiate with the IRS, but there is hope.
Back taxes are all the income tax you owe for previous tax years that you have not paid by the due date. The balance of your back taxes is charged penalties and interest until you pay it off in full. As the balance decreases, the amount of penalties and interest goes down but does not zero out until the balance is completely paid.
The IRS determines all of your property and investments available, including your vehicle, home, and retirement accounts, to decide whether they feel you can pay your back taxes in full. If you are not able to pay your tax debt in full, there are several payback options you can choose from.
Penalties on your tax delinquency add up. Proving to the IRS that you cannot pay these penalties can mean a reduction in the total amount due. Listed below are your options for settling back taxes.
The IRS allows you to set up an installment payment plan to help you pay your tax debt. Just remember that if you skip any payments or short-pay the monthly bill, the IRS can revoke your payment plan and demand the entire amount be paid at once.
To be eligible for an installment plan, you must:
If you owe more than $25,000, you must make payments via automated withdrawals from a bank account.
Many payment plans are available and the IRS payment plan options are always evolving. Currently, the payment plan options are:
An offer in compromise is a “settlement” for less than the tax balance due. However, you must prove you absolutely cannot pay the full amount. You can offer to pay the reduced amount in a lump sum or in short-term installments.
Here’s what you have to do to have a shot at an offer in compromise:
Once you file an application, the IRS will suspend collection activities. The IRS can still file or retain any tax refunds until it accepts your offer and you have fulfilled your end of the compromise.
You do not qualify if you are in bankruptcy proceedings.
If you absolutely cannot pay on time, you can request a delay in collection by completing a Collection Information Statement to prove your finances really are entirely underwater. It's sadly temporary, and the IRS may review your income annually to see if your situation has improved.
It does not make your tax debt disappear, and the IRS can still file a tax lien on your property.
Whatever your method to settle back taxes, you need an experienced firm on your side. Top Tax Defenders can help. Our team has: