Being in tax debt is no fun at all. It’s scary when you get letters from the IRS saying that you owe them money. It’s even worse when you just don’t have the extra funds to take care of the debts.
It can overwhelm anyone, especially if you’re being threatened with tax levies and wage garnishments. That happens to thousands of taxpayers every year because that haven’t or can’t pay their taxes.
Read on to find out how you can get help with back taxes and take the weight of IRS debts off of your shoulders.
1. Don’t Bury Your Head in the Sand
The worst possible thing you can do is to bury your head in the sand. Throwing those letters away or letting them pile up isn’t going to make the problem go away. It will only make it worse.
If you got caught off guard with your taxes, it’s OK. It happens. Maybe you’re a freelancer and didn’t put enough money aside to pay your tax bill.
Your best plan of action is to take action. You need to be in regular communication with the IRS and come up with a plan that you can stick with.
2. Partial Payments
You can start to pay back your back taxes by paying what you can now. For example, if you owe $5000 and can only pay half of that, pay the remainder in installments.
With this type of agreement, you have to pay your obligations on time. Failure to do so could jeopardize your agreement.
3. Installment Agreement
An installment agreement is negotiating with the IRS to pay your back taxes in monthly installment payments, similar to paying in partial payments. The only difference is that you’re not paying a lump sum to bring down the total amount owed.
This may seem like a better option than a partial payment but remember that the IRS adds on interest and penalties to any monies owed. You’re likely to pay a bit more in interest and penalties because you’re paying off your debts more slowly.
4. Statute of Limitations
Did you know that your tax debts are collectible for a certain period of time? There is a statute of limitations on your tax debts, which is generally 10 years after the date they were assessed.
Once the 10 years is up, then the IRS can no longer attempt to collect on your tax debts. There are certain situations that can extend this time period beyond 10 years.
For example, if you declared bankruptcy and the IRS couldn’t collect on your debts during that time, that period of time will get tacked on to the end of the 10 year period.
5. Offer in Compromise
One program that taxpayers can take advantage of is an offer in compromise. This can greatly reduce your tax bill. It’s a lengthy process that can take up to two years, but it can be worth it.
With an offer in compromise, you fill out a few documents and make an offer to pay less than what you owe on your taxes. An offer in compromise doesn’t guarantee that you’ll be done with your back taxes. In fact, about 40% of these offers are accepted by the IRS.
If you’re one of the lucky ones to get your offer accepted, you still have tax obligations to fulfill for 5 years after your offer is accepted. You have to pay all of your taxes in full and on time. If you have any refunds during this 5 year period, the IRS will keep your refund and apply if towards your back taxes.
6. Not Collectible
If you’re experiencing financial hardship, you can let the IRS know and they may be able to declare your account as ‘Currently Not Collectible.’ This means that the IRS won’t attempt to collect on your tax debt for a period of time.
This can be anywhere from a few months to a year. During this time, you can work with the IRS to determine the best way to pay your taxes without the pressure of having your accounts levied to pay the debts.
Remember, that this isn’t a tool to try to run out the clock on the statute of limitations. This will only extend the period of collectability on your back taxes.
7. Call a Tax Professional
Any time you’re dealing with the IRS, you don’t want to go at it alone. This is especially true when you’re dealing with certified letters that are threatening levies or garnishments.
You want to be able to have someone who is experienced in working with the IRS to help with back taxes. You can learn more here.
8. File for Bankruptcy
Bankruptcy is basically the nuclear option to handle your back taxes. You may be able to qualify to get your tax debts resolved under Chapter 13 or Chapter 7 bankruptcy.
Get Help with Back Taxes
Let’s face it, owing anyone money is a burden. Owing the IRS is a burden, plus added worry and anxiety over what they can do if you don’t pay your taxes. They could levy your bank accounts, garnish your wages, or take your property.
That’s a scary prospect for anyone to bear. The good news is that there are a lot of ways to get help with back taxes. The IRS doesn’t want to take your property. They’d much rather work with you to resolve your debt.
If you handle the problem head-on and don’t try to avoid it, you’ll have a much better chance at finding a way to handle your back taxes.
Do you want more financial tips? Check out this financial toolkit with all of the tips and resources you need.