How to Get Relief from Back Taxes
Back taxes are the fully or partially unpaid taxes you owe to the local, state, or federal government from the previous year. While some taxpayers intentionally choose not to pay taxes, many fall behind unintentionally due to financial hardships.
Here are three ways to get relief from back taxes.
1. IRS Payment Plan (Extension)
If you need an extension to pay your taxes, the Internal Revenue Service (IRS) can provide you a short-term or long-term payment plan.
Short Term Payment Plan: The maximum debt is $100,000 in combined tax, penalties, and interest. You can apply for this extension online, by phone, or in-person for a $0 fee and pay by debit/credit card, check, money order, or checking account.
Long Term Payment Plan: The maximum debt is $50,000 in combined tax, penalties, and interest.
- Payment via Automatic withdrawal: $31 to apply online; $107 to apply by phone, mail, or in-person. (Fees waived for low-income applicants.)
- Payment via any other method: $149 to apply online; $225 to apply by phone, mail, or in-person. (Fees reduced to $43 for low-income applicants)
2. Offers in Compromise
This is the most appealing option for people with tax debts. In this option, the IRS allows you to settle the tax debt less than what you currently owe, known as Offers in Compromise.
For getting an offer in compromise, you have to show that you can’t pay your taxes at all or that paying the debt will cause you financial hardship.
To determine your status, IRS will check your income, expense, ability to pay, and assets. There are no penalties involved; however, you will have to pay a $186 application fee and an initial payment (first monthly payment or 20% of the current debt amount).
Please note that the IRS accepts less than half of the offers in compromise that it receives, meaning you cannot expect your application to get accepted.
Qualification: You can’t apply if you are back on tax returns or in an open proceeding for bankruptcy.
3. Get a Currently Not Collectible Status
If you can’t pay tax because of financial hardships, you can ask the IRS to change your account status to ‘Currently not Collectible.’ You will have to fill up a Collection Information Statement to show that your condition is as bad as you say it is. You will also have to submit monthly income and expense documents.
If the IRS decided to fit this criterion, understand that it’s only temporary as your debts won’t just disappear. During this time, the IRS will not take any aggressive tax collection tactic against you. However, during this time, your tax debt will keep collecting interest and penalties that can add up to a significant amount.
IRS may check your income annually to ensure your financial hardships and even file a tax lien against you.
Ask a Tax Specialist How You Can Reduce Your Debt By Up To 75%
If you are confused about which relief will suit your needs, you should contact a tax specialist. These laws and policies can be complicated, and a professional can help you find the right option for getting rid of these back taxes.
Benefit Tax Group is proud to represent people and help them get the relief they need. If you want to get a free consultation explaining what we can do for you, please call us now at (800) 381-8816. You can also fill out our contact form.