The fastest way to resolve your Internal Revenue Service (IRS) back taxes is to pay them in full. You will need to include any interest or penalties that have accrued on the IRS back taxes since they were originally assessed. These can add up quickly and account for thousands of dollars in IRS back taxes. However, most taxpayers do not have the available funds to fully repay their taxes and must resolve their debt through one of the IRS’s settlement programs.
If you can afford to pay all of your IRS back taxes, but not in one lump sum payment, then you should consider an Installment Agreement (IA) with the IRS. An IA is a monthly payment plan to the IRS based upon how much you owe and how much you can afford to pay. However, the IRS is only willing to enter into an IA once a taxpayer has filed all of his or her necessary federal income tax returns. Therefore before attempting to get an IA you should make sure all of your tax returns from previous years are files.
If you cannot afford to pay on your IRS back taxes at all, then you might be interested in being placed on the IRS’ Currently Not Collectible status. To qualify for this type of relief you need to prove to the IRS that your monthly income is exceeded by your monthly necessary living expenses. The IRS is typically only willing to place a taxpayer into Currently Not Collectible status once the taxpayer has filed all of his or her necessary federal income tax returns.
If you cannot afford to pay your back taxes at all, you may qualify for an Offer in Compromise (OIC). An Offer in Compromise is a form of IRS back tax resolution. It requires the disclosure of extensive financial information in order to prove to the IRS that could not collect the full amount of back taxes the taxpayer currently owes. Specifically, the Offer in Compromise requires proving to the IRS that it could not collect your full back taxes over four or five years even if the IRS forced the sale of all assets that you currently own. The IRS is only willing to accept an Offer in Compromise once a taxpayer has filed all of his or her necessary federal income tax returns.
If your owed back taxes are from a few years back you may not actually need to do anything to resolve your back taxes. This is because the IRS only has ten years to collect back taxes from the date on which they were assessed. Therefore, if your unpaid back taxes are from 1997 or before, the IRS may not be able to collect those taxes anymore. However, there are events that can occur that will extend this timeframe, such as bankruptcy. To best ensure that your back taxes have expired, you may want to hire a tax professional to review your tax account with the IRS on your behalf.
As a last resort you could resolve your back taxes through filing for bankruptcy. However, there are a number of factors that must be considered before back taxes can be discharged in bankruptcy. First, you need to qualify for bankruptcy. Second, you need to properly file the bankruptcy. Third, you need to examine the age and type of back taxes. In general, recently assessed federal income back taxes cannot be discharged in bankruptcy. Additionally, business-related federal payroll back taxes generally cannot be discharged in bankruptcy. If you are considering filing bankruptcy you should speak with a bankruptcy attorney regarding whether your IRS back taxes can be discharged in a bankruptcy.
"If you've received a tax liability notice from the IRS you may be a little concerned, with good cause. Chances are the IRS is a lot more informed that you are about the laws and if the notice goes into collections the IRS may try to take your assets in payment. Fortunately, there are options that can help you if you ever find yourself in a tax collection situation.
The first thing you should do is to make sure that you definitely owe the tax. There are some rules about taxes that are important to know such as, you may not be liable for taxes charged against your spouse if you didn't file a joint return with him or her, depending upon Community Property laws in your state. Additionally, the IRS has a ten-year statute of limitations on collections, although there are exceptions that can stop the statute clock. Also, if you have discharged taxes in bankruptcy, the IRS is forbidden from collecting them. Further, it is not automatic that you personally owe taxes assessed against your corporation; IRS must take additional steps to assert those taxes against you.
If you do owe the taxes there are a few ways to handle collection correctly. Above all, maintain good contact with the IRS and save copies of all correspondence you receive and send about the tax liability. The first phase of the collection process after the taxes have been assessed is for the Internal Revenue Service to send a notice requesting payment of the taxes in full. Whether the bill is correct or not, you should contact the IRS to either review your possible options for satisfying the debt or provide the necessary documents to prove the bill is incorrect. Failing to contact the IRS may give the wrong signal and cause you to waive many of your rights. Doing nothing will not make the problem disappear and the collection process will continue with or without your participation.
Second, you should come up with a plan for paying off the tax liability. The IRS representative that contacts you will be interested in getting you to pay off as much as possible in the shortest amount of time. However, you need to ensure that whatever payments you agree to will fit into your financial circumstances rather than agreeing to whatever they offer. Having a plan before being contacted by the representative helps ensure that you pay off the tax on your terms.
Third, make sure you understand your rights as a taxpayer. The Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) expanded the rights of taxpayers when dealing with the IRS. Thanks to this act taxpayers now have rights to have a Due Process appeal certain collection actions. The law also created the Collection Due Process (CDP) appeal process as well as the Collection Appeals Program (CAP). These two procedures allow taxpayers the opportunity to be heard during various phases of the collection process and challenge certain collection decisions among other important rights.
All of the bureaucracy of the Internal Revenue Service can be difficult to deal with. If you find yourself in a tax liability collection situation you should consider hiring a professional that knows and understands the law and your rights well. A company such as Larson Financial may be a good investment when it comes to guarding your assets and protecting your income from an IRS collector.
Both Roni Deutch & Larson Financial are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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