How to Relieve Yourself of Back Taxes

Nothing beats that horrible feeling you get when the IRS informs you that they will audit your tax. Taxes are a complex affair, and sometimes trouble steps in when you least expect it. It does not help that tax authorities are so vigilant in their efforts to ensure tax collection. One common issue with most taxpayers is owing back taxes. Back taxes are the taxes that you did not pay or only paid partially in the year they were due.

There are several reasons why you may be owing back taxes. These include failure to pay the amount of tax obligation as filed, omission of income from your tax statement, or even failure to file a tax return. If your taxes remain unpaid after the IRS has notified you severally, you may be slapped with penalties that can accumulate over time to unmanageable amounts.  If you are having issues with back taxes, you can seek professional tax relief services to help you navigate the situation. 

Apart from contacting a tax relief company, below are other measures you can take to end your tax woes;

1. Seek a Favorable IRS Payment Plan

When you need more time to pay your taxes, the IRS can draft a suitable payment plan for you. There are two types of installment plans that you can use. One of these is the short-term payment plan and the other is the long-term payment plan. Both plans take no more than 120 days.  

The short-term payment plan works if you owe a maximum of $100,000 in taxes and penalties. You will not need any money to apply online. You can also apply by phone, mail or in –person. In the short-term arrangement, you will pay through automatic withdrawals from your checking amount either by debit or credit card, check, or money order.

The long-term plan works of you owe amounts of $50,000 in total taxes, interest, and penalties. The plan costs $31 to apply online and $107 to apply by other means such as email and phone. If you are a low-income applicant (income below 250% of federal poverty level), the IRS can waive these fees. 

Note that your interest continues to accrue until you have completed your tax obligation. 

2. Offers in Compromise

Another method you can use to get yourself out of tax debt is using an offer in compromise. With this arrangement, you end up paying the IRS less than you owe. You will qualify for an offer in compromise if you are unable to pay your tax debt or if you will get into financial hardship if you pay your debt. Getting the IRS to give you an offer in compromise is not easy. On average, only less than half of the requests for this kind of arrangement go thorough. 

Several factors that the IRS will consider before granting an offer in compromise are your income and expenses and the number of assets you have. To see if you qualify, you can use the Offer in Compromise Pre-qualifier Tool to determine if you qualify.

How to Apply for an Offer in Compromise

To submit an offer in compromise, you have to pay a non-refundable fee of $186. You also have to have filed your most current tax returns. If you have not filed your returns for a while, you may not qualify. You may also not qualify if you have bankruptcy proceedings.

3. Apply for ‘Current Not Collectible’ Status

If you are not able to pay your taxes and living expenses, you can request the IRS to put your account in ‘Currently Not Collectible’ Status. This kind of arrangement delays your collection. You will have to complete a ‘Collection Information Statement’ from the IRS that proves that your finances are bad.  In the statement, you will provide information about your income and expenses.

This form of tax relief is temporary and the IRS will review your income annually to determine if you still qualify. 

Tax debts can accumulate and become unmanageable. To avoid tax penalties, consult a tax professional to ensure that you always file your income on time. In case, you get into a back tax situation, use the methods above to try and seek relief.