What you will learn:
- If you owe the IRS back taxes, address the problem quickly, including submitting tax returns on time.
- There are many options you can use to get your taxes back in order.
- When necessary, a tax attorney such as The Law Office of Lance R. Drury can assist you in navigating the tax laws and setting up a plan to resolve your debt.
How Should You Handle Back Taxes?
No matter who you are, if you are a working adult, you likely pay taxes. Unfortunately, sometimes people get behind on their taxes for various reasons. It may be financial struggles or a miscalculation. Whatever the reason, when you have IRS debt, it can be very stressful. However, the good news is that there are a number of things you can do to address the situation.
Tips for Paying Off Back Taxes
Tip 1: Always File Your Return
Owing money to anyone is unpleasant, especially when that someone is the U.S. government. This leads some people to want to ignore the problem. Of course, this is the wrong course of action. The IRS isn’t going to forget about the fact that you owe taxes, so you can’t either.
This starts with always submitting tax returns. Even if you are unable to pay right away, you should always file your return. First and foremost, if you don’t file, the IRS has no way of knowing that you are trying to make good on your back taxes. Secondly, the penalty for late filing is 5% of the tax owed per month up to a maximum of 25% of the outstanding balance. In other words, you will quickly increase your problem by trying to ignore it.
Tip 2: Consider an Offer in Compromise
Despite how it may feel at times, tax laws are not designed to punish people for being in difficult financial situations. In fact, there are a number of options that the IRS provides to help you pay off your debt.
One of the most valuable options is Form 656, which is an application for an “Offer in Compromise.” This means that you will settle your back taxes for some amount that is less than the current outstanding balance.
You may want to consider an Offer in Compromise if you have little equity in assets and do not have a high income.
Tip 3: Set Up an Installment Agreement
Another option is to set up a payment agreement. This can either be an agreement to pay within a short amount of time (helping to reduce penalties and interest during that time) or an installment agreement. For many people with back taxes, the installment agreement is the best option.
Installments can be made over a fairly long time, up to 72 months, in the case of a streamlined agreement. If you have such an agreement set up, the IRS will not pursue further collection efforts as long as you are current.
Tip 4: Hire an Attorney To Help With a Tough Situation
If you owe more than $10,000, you should strongly consider consulting with an attorney. They can help you avoid some of the more challenging situations. Additionally, an attorney will be able to help you navigate your repayment options.
However, it is important to hire the right help. There are many tax relief scams and less-scrupulous services. It is always best to work with an experienced tax attorney. They should be admitted to the bar in your jurisdiction.
It is often very valuable to hire an attorney. Simply having a knowledgeable advisor can help to reduce the stress and help you find a path to repayment. Plus, selecting the right repayment option can save you hundreds or even thousands of dollars.
Tip 5: Explore a Delay in Collection Efforts
In some cases, it is possible to request a delay in collection efforts by the IRS. This is usually an option when you are in a difficult financial situation. If approved, the request will prevent the IRS from using more aggressive collection efforts such as tax liens, wage levies, and other such mechanisms.
This can be helpful for people who need a little time to get their finances in order to repay the tax debt. However, again, it may not be an option for everyone. It is intended for those who are facing financial hardship. So, if you are gainfully employed and simply underpaid your taxes, this likely won’t be an option for you.
Tip 6: Set Up a Plan and Stick With It
Perhaps the most important thing you can do about your IRS debt (other than submitting tax returns on time) is to be consistent. Create a plan based on the options that the IRS offers, then stick to it. For example, you will be in a much better situation if you create an installment agreement of amounts that you can consistently pay than one that you can’t keep up with.
While the IRS is hardly a forgiving entity, it does provide options to help people get back on the right path. The government wants you to be on the right path and isn’t interested in punishing you for the sake of punishment. However, the IRS also won’t hesitate to use more aggressive collection efforts if it deems doing so to be necessary.
If you have a repayment plan and stay consistent, you will likely be able to find your way back to being current on taxes. In the event that you can’t keep up with payments, contact the IRS immediately. Changing the payment amount or getting a short deferral is better than simply not paying.
Get Help Dealing With Your IRS Debt at The Law Office of Lance Drury
Dealing with back taxes is stressful and can be financially straining. Fortunately, the tax laws can help you to get back on track. If you need professional help to navigate the law and find the right repayment option, contact The Law Office of Lance R. Drury. We provide tax lax services in St. Louis and Ste. Genevieve, MO and Nashville, TN that can empower you to resolve disputes with the IRS and avoid more severe penalties.