What does owing back taxes really mean for your finances? Nobody wants to get a letter from the IRS about back taxes, but trying to close your eyes until it all goes away will make things much worse. As a taxpayer, you should know that the IRS offers many tax relief options that will get you on the road to back tax forgiveness.
Don’t let the burden of owing the IRS money stifle your financial plans or peace of mind for one more day. The first step in figuring out how to get rid of back taxes is finding out how much you owe the IRS.
How to Find Out How Much You Owe the IRS
The IRS allows you to make an online account to view what you owe. You can also use your account to apply for a tax payment plan as one of your debt relief options. Setting up this account can be a little overwhelming due to the breadth of information the IRS requires. If you’re unsure about how to make first contact with the IRS, you can bring in a tax pro with experience in this arena to help you get it done.
What Are the Tax Relief Options When You Owe Money to the IRS?
There are several ways to reduce back taxes. If possible, pay the full lump sum that you owe right away. This is the simplest way to put a stop to the IRS’s pursuit of your back taxes. Don’t let unfiled returns stop you from paying what you owe; it’s essential to file all missing returns even if you can’t make a full lump payment right now. The IRS won’t work with you on back tax relief if you have any unfiled returns. Not filing your taxes is not a way to hide from the IRS. They use other sources to determine how much you owe even if you never file a return.
Installment Agreement (IA)
The most common option for tax relief is a payment plan. With the IRS, a payment plan takes the form of something called an IRS Installment Agreement (IA) that chops your total tax debt into smaller payments over 72 months. In addition to making your payments more realistic, an IRS IA pauses all penalties and interest as long as you’re staying current with payments. The IRS will generally not enforce collections as long as a payment plan is in place. However, if you default on a payment, the IRS will subject you to all of the previously held-back interest and penalties.
Offer in Compromise (OIC)
An IRS Offer in Compromise (OIC) is a settlement for taxpayers who cannot pay the full amount owed in back taxes. With this settlement, a taxpayer makes an offer to the IRS based on how much they can afford to pay. The IRS will either accept or reject the offer based on the financial details of the taxpayer. The IRS can be very restrictive when it comes to qualifications for this type of settlement. As a result, most taxpayers who are serious about being qualified for OICs work with tax experts who are familiar with the IRS to present offers that are more likely to be accepted. It’s also important to comply with all of the IRS’s requirements when submitting your application and financial records.
Currently Not Collectible (CNC)
If you’re under extreme financial hardship, you may be able to petition the IRS for Currently Not Collectible (CNC) status. With this agreement, the IRS will defer your debt obligation until you can begin making payments. You will be free from worries of having penalties, interest, fees, levies, and wage garnishments as long as you are under CNC status.
Some situations where you might qualify for CNC relief include being on Social Security benefits, being unemployed, or having little to no money left over at the end of each month after covering your basic living expenses. The IRS will check back on your status periodically once a CNC “closing code” has been placed on your record to see if you’re in the position to make payments.
While the IRS may not necessarily ask you to pay all at once if your income grows, they may ask you to begin an Installment Agreement. In some cases, a taxpayer may never pay the back taxes owed because the statute of limitations kicks in before their financial situation changes. While only a small number of people qualify for Currently Not Collectable status with the IRS each year, talking to a tax professional can help you gauge your likelihood of being approved for back tax forgiveness.
Penalty Abatement
Many taxpayers don’t realize that they can have penalties forgiven under certain circumstances. While the IRS does slap on penalties and interest if you’ve failed to file or pay taxes, they aren’t necessarily permanent. You may be able to have penalties removed if this is the first time you’ve failed to file taxes on time. Additionally, the IRS may remove penalties if you had a good reason for not filing your taxes when you should have. While being “too busy” is not a valid excuse, things like illnesses or natural disasters are.
How Can Tax Group Center Help You?
While the IRS may seem intimidating, you can rest assured that the agency’s goal is to collect as much of what you owe as possible. This is why the IRS is surprisingly generous when it comes to options for tax forgiveness. Sitting down with a tax expert to determine which relief option will provide the best back taxes help is the fastest way to enjoy the highest level of tax forgiveness available for you.
If you’re wondering how to get rid of back taxes, the Tax Group Center team can help you work out a plan to reduce penalties and interest while getting back on the road to a clear financial future. When looking at your situation, we’ll consider factors like an upcoming statute of limitation, your income situation, and the total debt you owe to determine the option that will leave you in the best shape.
While not everyone will qualify for every type of relief, almost all taxpayers are at least in the position to work out payment plans with the IRS. The first step may be as simple as getting all caught up with unfiled returns from previous years. Our team understands tax relief options from top to bottom because we’ve been working with the IRS on behalf of our clients for more than 30 years. Let us walk you through the terms of all of the different tax relief options on the table. Contact Tax Group Center today for a consultation.
