Taxes are never fun, but having IRS back taxes owed is even worse. Suppose you’re one of those people who has been struggling with unpaid taxes. If you were not aware, then you are probably wondering. What are back taxes, and how to get rid of your back taxes?
Back taxes are the financial consequences of late or unpaid taxes. These are the taxes that were owed in the previous year. Penalties and interest for late tax payments have to be paid in full. Some serious legal actions for not paying back taxes are IRS tax liens, wage garnishment, and more. You may owe back taxes because you have failed to file your tax returns or because you have not paid federal, state, and local taxes while they are due; this article will provide information on how to get rid of your back taxes.
Understand how much you own.
To find out if you own back taxes then, you can create an IRS individual taxpayer account and check your tax balance at any time. You can sign up for a taxpayer identification number (TIN) with the IRS and access your tax information online anytime. An application for a longer payment plan can be submitted through your account and may result in lower tax debt. The IRS’s detailed requirements can make opening this account seem like a monumental task. In order to get the ball rolling with the IRS, you may want to retain the services of a tax professional who is familiar with working with them.
What to do
How do you get rid of your back taxes?
Getting informed about your choices is crucial. You can prepare to pay off your back taxes by speaking with a tax attorney or formal IRS tax professionals. You have the right to be represented by an attorney and formal IRS tax professional in any dispute with the Internal Revenue Service. Because of tax filing complexity, tax regulations warrant requires professional assistance. Until you have hired a tax attorney, you can ask the Internal Revenue Service to suspend all collection efforts temporarily. But don’t procrastinate because waiting too long will just make matters worse.
Whatever type of bill you currently face, the best time to start planning is well in advance. While discussing your issues, you can plan the payment method that suits you. With that, there are many other things you can do.
- Installment Plans
Installment plans are like house loans. In this method, you will pay your taxes in monthly payments. Getting approved for an extended payment plan on your taxes is not always possible The Internal Revenue Service (IRS) is a tax collecting agency. Therefore it naturally prefers to get paid rather than not get paid. There is no incentive for them to work out a payment plan with taxpayers who haven’t been paying their bills on time.
- Programs for Innocent Spouses
If you and your ex-spouse file a joint tax return, both of you could be held responsible for any tax shortfall. However, married or separated couples are eligible for certain tax relief from the Internal Revenue Service (IRS) if one partner conceals tax liability from the other.
If one partner can prove that the other underreported income, overdeclared expenses, or claimed improper deductions or credits. The foregoing considerations may allow the misled partner to file for tax relief.
- Make a tax extension request due to financial difficulty.
Taxpayers experiencing financial hardship have options, including currently, not collectible status and the offer in compromise, both of which are provided by the IRS. You need to show the IRS that you cannot afford to pay the tax you owe to get an extension based on hardship.
- Offer in Compromise
With an offer in compromise, you can settle your tax debt for less than the amount owed. If you have tax debt and cannot pay it or if doing so would put you in severe financial hardship, you may be entitled to file for bankruptcy protection. For OIC, IRS considers earnings, expenditures, assets, equity, capacity to pay, and more.
- Take a loan
It may be possible to consolidate tax debt by taking out a loan, either on a personal or commercial level. If you get the loan, your payment and interest rate will remain the same each month for its entire term. You may be able to borrow money at a much lower interest rate and pay it back faster than you would pay the IRS their application fee, fines, and interest.
- Borrowing money from 401K
If you have outstanding taxes and are eligible for a 401(k) loan, you may wish to use the funds to pay them off. It’s a low-cost and easy way to get the money you need to settle your tax bill. However, your retirement funds may be jeopardized if you fail to repay this loan.
Every solution has pros and cons. It depends on the amount you owe and what’s solution fits better in your current situation. So, instead of wasting your time weeding through IRS systems and documents, let the tax professional handle it. They have the background knowledge to work with you in full compliance with the IRS and the tax code to get your back taxes settled.