Settle Back Taxes

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.

What Are Back Taxes?

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.

>>Click Here to Learn About How to Avoid IRS Tax Penalties

You Have Options

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.

Payment Plan

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:

• Be up to date in filing all tax returns. If you have failed to file as well as failed to pay, you are not eligible for an installment plan
• Have paid most of your state income taxes and late fees
• Be able to make the minimum required payment

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:

• Short-term (180 days or fewer) - To be eligible for this plan, you can owe a maximum of $100,000 in combined taxes, penalties, and interest. You can apply online, by phone, by mail, or in person for free. Payment can be made online or by phone, by automatic withdrawals from a checking account or by check, money order, or debit or credit card.
• Long-term (120 days or more) - If you agree to pay via automatic withdrawals, you are charged $31 to file online or $107 to file by phone, mail, or in person. These fees may be waived for low-income taxpayers. If you owe less than $50,000 you can enter a streamlined 72 month payment plan. If you cannot afford this amount then the IRS will evaluate your financial information and place you a payment plan based on your financial information. If you owe over $50,000 the IRS may place you on a payment plan based on the expiration dates on each year that you owe for. You can be placed in this plan without the IRS reviewing your financial information. If you cannot afford this amount, again the IRS will evaluate your financial information and arrive at an amount you can afford.
• If you pay using some other method - You are charged $149 to apply online and $225 to apply by phone, mail, or in person. The fee is reduced to $43 for low-income applicants and may be reimbursed under specific circumstances.

>>Click Here to Learn How to Settle Back Taxes with a Payment Plan

 

Offer in Compromise 

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:

• Pay a $205 non-refundable filing fee.
• Report required details about your income, spending habits, assets, and equities.
• Make a small initial payment of at least 20% of the compromise amount, also non-refundable.
• Be current on filing all your tax returns and quarterly estimated tax payments if required.

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.

>>Click Here to Learn How to Make an Offer the IRS Will Accept

Currently Not Collectible

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. This reprieve is only temporary though, and the IRS may review your income annually to see if your situation has improved. 

 This action does not make your tax debt disappear, and the IRS can still file a tax lien on your property.

>>Click Here to Learn About Getting Currently Not Collectible Status

Hire Tax Professionals

Whatever your method to settle back taxes, you need an experienced firm on your side. Top Tax Defenders can help. Our team has:

• Over 27 years of experience
• Knowledge of tax law and IRS practices
• Experience aggressively pursuing tax debt solutions from IRS for our clients

>>Click Here to Read Real-Life Success Stories from Our Clients

Frequently Asked Questions About Settling Back Taxes

Can I really settle my tax debt for less than I owe?

Yes, but only if you qualify. The IRS offers programs like an Offer in Compromise for taxpayers who cannot realistically pay their full balance. Qualification depends on your income, expenses, assets, and overall ability to pay.

What’s the best way to settle back taxes with the IRS?

It depends on your financial situation. Some people qualify for a reduced settlement, while others are better suited for a monthly payment plan or temporary hardship status. The right strategy comes down to what the IRS determines you can afford.

Do I qualify for an Offer in Compromise?

You may qualify if paying your full tax debt would create financial hardship or if there’s doubt about collectibility. The IRS reviews your income, expenses, assets, and future earning potential before approving an offer.

Will the IRS stop collections if I start the process?

In many cases, taking action can help pause or reduce aggressive collection efforts. Once you’re working toward a resolution (like submitting an Offer in Compromise or setting up a payment plan) you may gain protection from further enforcement.

How long does it take to settle back taxes?

Timelines vary based on the resolution option. Payment plans can be set up relatively quickly, while an Offer in Compromise may take several months for IRS review and approval.

What if I can’t afford any payments right now?

If you’re experiencing financial hardship, you may qualify for Currently Not Collectible (CNC) status. This temporarily stops IRS collection efforts until your financial situation improves.

Do I need to file all my tax returns before settling my debt?

Yes. The IRS requires you to be compliant with all required filings before approving most resolution options. Filing any unfiled returns is typically the first step in the process.

Will penalties and interest continue to grow?

Yes, penalties and interest generally continue to accrue until your balance is resolved. Acting sooner can help limit how much your total debt grows over time.

Why should I work with a tax professional instead of handling it myself?

IRS resolution programs are complex, and mistakes can lead to delays or denials. Working with an experienced team can help you choose the right strategy, avoid costly errors, and improve your chances of reaching the best possible outcome.