What Are My Options If I Owe Back Taxes?

IRS Problem Resolution sign being held up

Certain taxpayers are surprised that they owe additional income taxes yearly even though their employer withholds taxes from their weekly paycheck. Having an outstanding tax debt is not as uncommon as you think, and there are many reasons it could happen. About 24% of all Americans owe back taxes. If you’re among them, you know how nerve-racking it can be, whatever the amount.

Although sometimes it may seem that way, the Internal Revenue Service (“IRS”) is not out to maliciously target you. Since some of the tax code is confusing, it is easy to make mistakes; even the IRS makes them. It is essential to recognize this to remain calm when dealing with this situation.

Just getting a notice from the IRS can be unnerving. If you don’t agree with the IRS’s assessment of a tax owed or don’t understand the IRS’s position, the best approach is to write out your points and questions methodically. This purpose is to put your information and questions into a concise format to allow a conducive discussion with the IRS.

If you are responding in writing, include your name, social security or tax ID, and the notice’s reference number, which you can find in the upper right-hand corner of the first page of the notice.

Please remember that the goal is to resolve the issue quickly; how you engage the IRS personnel could assist or impair this. Your issue will be addressed by an individual and not a faceless careless entity. Being polite and cordial will make your issue more likely to be addressed and resolved.

If your situation entails owing an undisputed tax debt to the IRS and you cannot pay it, you have options. Ignoring the debt is never viable since the tax debt will not go away and will increase with additional penalties and interest. Eventually, your situation will be compounded by the IRS taking a more aggressive approach involving the issuance of liens followed by levies and or garnishments. You could even have your passport taken from you.

Dealing with the IRS in the same manner as described earlier to devise a payment arrangement known as an installment plan is a viable option. The IRS has several types of installment plans, each of which is deviated based on assessed tax amounts owed. The information-gathering requirement for each type varies as well.

Suppose you’re in a financial predicament where you cannot pay basic living expenses and the IRS tax debt. In that case, you may qualify for other options, such as being placed into a Currently Not Collectible Status (“CNC”), where the IRS will halt collection activities. In contrast, your financial situation remains as such. Under this plan, the ten-year Collection Statute Expiration Date (“CSED”) continues to run, and once you reach the CSED for an assessed tax, the IRS can no longer collect the debt, and it gets removed from collections.

Other options may include qualifying for a form of an Offer In Compromise (“OIC”), where there is a settlement agreement to pay the debt for less than the original amount. OICs are considered by the IRS when tax liability or collectability of the debt is in doubt. In other words, if they’re not sure about how much you owe or if they believe you might not ever pay, the IRS could settle for a type of OIC.

In addition, you may qualify for a Partial Payment Installment Agreement (“PPIA”) which allows for a lesser payment. This is like OIC consideration, where one cannot pay the entire tax balance owed before the CSED. In some cases, this is a better option and an OIC.

Regardless of the plan, you must comply with your tax return filings. Otherwise, you will be ineligible. Generally, six years is how far back you have to comply with filing your tax returns. In some cases, the IRS could require beyond that.

Most installment plans where full tax debt payment is to occur can be set up with the IRS without too much headache. However, if you are dealing with an OIC, PPIA, or CNC, it is highly recommended that you seek the help of a qualified tax resolution firm like Harmon Tax Resolution, LLC. You will deal directly with a multi-licensed Tax Attorney-CPA-IRS EA who will ensure your case is adequately represented. In addition, any required tax compliance work can be addressed as well.

Do you owe back taxes? Are you doing anything to fix the problem? You can have a free consultation directly with a multi-licensed Tax Attorney-CPA-IRS EA. Not taking action doesn’t solve the problem – make the call today and sleep well tonight.

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