“Back Taxes” is a common phrase heard around the typical IRS office. Studies show that approximately 19% of people in the US owe some sort of delinquent taxes. You will be happy to know that even though the idea of owing back taxes may be disturbing, there are many programs available to you to solve your tax issues. The IRS is willing to work with you, but without the knowledge and proper tools, they will attempt to collect as much as possible in as short a time as possible. Hence, if you want to settle your tax issues in a manner that is affordable, you need to make sure that you obtain the best representation possible. There are many options allowing one to pay an amount less than what they actually owe.
The first step your representative needs to take in order to resolve your tax issue is to determine exactly how much you owe and get a good idea of how much you can afford to pay. Looking at your latest notice sent by the IRS may give you an idea of how much you need to pay, but this number is often not accurate and when it is not it is usually higher. If you have unfiled tax returns, you will need to prepare and file them with the IRS. Once this is complete you will be able to figure out how much you owe including penalties and interest. At this point you can determine the best way to resolve your tax problem with the IRS.
If you are unable to pay your back taxes in one lump sum payment, you can enter into an Installment Agreement with the IRS. The Installment Agreement programs allow you to pay back the amount you owe over time. If you are unable to pay any amount in installments or otherwise, you may be able to be placed into Currently Non Collectible (“CNC”) status in which the IRS will not collect any amount from you for a given period of time. Another option is to submit an Offer in Compromise (“OIC”) in which you settle for an amount less than the amount you owe. This program allows you to pay the agreed upon reduced amount over a given period of time.
With many of these programs you may are required to disclose financial information in order to establish your Disposable Income. The IRS will allow you to enter into an Installment Agreement only if you have filed all your income tax returns. In order to be placed into Currently Non Collectible (CNC”) status with the IRS, you would need to prove that your monthly living expenses exceed your monthly income.
The IRS has 10 years to collect taxes from the date on which they were filed. For example, if you file your 2007 tax return in 2011, the IRS would have until 2021 to collect any unpaid taxes. If reading all of this seems overwhelming, do not get upset…you are not alone. We at the Tax Resolution Institute are here to help. Call us right now and we will help you through the process.
About Peter Y. Stephan
Peter Y. Stephan, executive director of the Tax Resolution Institute, has been helping people resolve large, complex payroll tax problems and personal income tax problems for over 25 years. Peter has written a book "The Ultimate Tax Resolution Guide" and speaks on Tax Resolution topics frequently.