Are you burdened with back taxes? If you’re facing the stress and anxiety of unpaid taxes, don’t worry, because you do have options.
Facing back taxes can indeed be terrifying, but again, with the right approach, what’s not possible? Let’s be real, you can find relief and regain control of your finances. All with just the right strategy. So why wait? Let’s explore the various options available to individuals and businesses seeking relief from back taxes.
Understanding Back Taxes
Before we start to discuss anything at all, let’s first have a fair understanding of what exactly back taxes are. Back taxes refer to unpaid taxes from previous years. This happens due to a pile of reasons, such as failure to file tax returns, underreporting income, or errors in tax calculations.
When taxes are left unpaid, the IRS (Internal Revenue Service) or other tax authorities can take action to collect the owed amount, which can result in penalties, interest, and additional financial burdens.
But, what are the different options that you get when dealing with back taxes? Well, the options are pretty plentiful! If you qualify, there’s no doubt about getting it!
Option 1: Installment Agreement
One common option for individuals and businesses to resolve back taxes is through an installment agreement.
An installment agreement enables taxpayers to pay their tax debt in a monthly timeline. This is especially helpful when you want to reduce the financial strain. To qualify for an installment agreement, you must meet certain criteria and adhere to the terms set by the tax authorities.
It’s crucial to communicate and negotiate with the IRS or relevant tax authorities to establish an arrangement that suits your financial capabilities.
Option 2: Offer in Compromise
Another potential solution for those burdened with back taxes is an Offer in Compromise (OIC).
This is just a form of agreement between the taxpayer and the IRS that allows the taxpayer to settle their tax debt for less than the original amount owed. This is available to individuals and businesses who can demonstrate that paying the full tax debt would cause significant financial hardship. This also means that you should be able to show reasonable cause for requesting an Offer in Compromise.
The IRS carefully evaluates the taxpayer’s financial situation and determines the taxpayer’s ability to pay. Assuming it is approved, the taxpayer can settle their tax debt by making a lump sum payment or through a short-term or long-term payment plan.
Option 3: Currently Not Collectible (CNC) Status
In certain circumstances, individuals or businesses undergoing severe financial hardship may qualify for Currently Not Collectible (CNC) status. This status means that the IRS or tax authority temporarily suspends collection efforts due to the taxpayer’s inability to pay the tax debt.
While the CNC status provides relief from immediate collection actions, it’s important to note that the tax debt still exists, and interest and penalties may continue to accrue. The IRS regularly reviews the taxpayer’s financial situation to determine if their ability to pay has improved.
Option 4: Seek Professional Assistance
It is true that back taxes can be disconcerting. Usually, it is just something people overlook at times, causing them major upheaval by the time the debt comes to light. This is where seeking professional assistance becomes imperative, and most likely, a wise choice.
Why?
Well, because they are the only people who can provide valuable guidance and support. Taking the help of a tax attorney, certified public accountant (CPA), or professional tax consultant can ensure that you explore all available options and choose the best course of action for your specific situation.
These professionals have in-depth knowledge of tax laws and regulations. They can negotiate with tax authorities on your behalf, increasing your chances of achieving a favorable outcome. Truly, they are key to resolving any tax issues, straight up from IRS tax liens to back taxes. You name it, they have a solution for it!
Relief from Back Taxes: Exploring Your Options
Dealing with back taxes can be a stressful and overwhelming experience for taxpayers. Fortunately, there are various options available to provide relief and help reduce the burden of tax liabilities. In this article, we will delve into some additional options to consider when seeking relief from back taxes.
Penalty Abatement
IRS Penalty abatement is a valuable option for taxpayers who want to minimize their tax liabilities and avoid additional penalties. The IRS understands that people may face circumstances beyond their control, leading to non-payment or late payment of taxes.
This is where penalty abatement comes into the picture! Penalty abatement enables taxpayers to request the removal or reduction of penalties imposed on their unpaid taxes.
If you want to be eligible for an IRS penalty abatement, it’s important that you demonstrate reasonable cause, such as a serious illness, natural disaster, or unavoidable financial hardship that hindered your ability to pay taxes on time.
PPIA (Partial Payment Installment Agreement)
The Partial Payment Installment Agreement (PPIA) is another option that helps taxpayers to pay their back taxes in installments. Unlike a regular installment agreement, where the taxpayer pays the full tax debt over time, the PPIA allows taxpayers to pay a portion of the total amount owed.
The key requirement is that the total amount must be paid by a specific date, typically before the expiration of the statute of limitations.
The PPIA is actually very flexible to taxpayers who cannot afford to pay the entire tax debt upfront, allowing them to meet their obligations through manageable monthly payments.
Innocent Spouse Relief or Injured Spouse Relief
In certain situations, taxpayers can face tax liabilities due to the actions of their spouse or ex-spouse. Innocent Spouse Relief and Injured Spouse Relief are two options designed to tackle situations like these.
Innocent Spouse Relief offers relief to taxpayers who can prove that their spouse or ex-spouse is solely responsible for the tax debt.
While, Injured Spouse Relief applies when a joint tax refund is seized to satisfy the past-due obligations of one spouse. In this case, the injured spouse can request their portion of the refund to be allocated to them, protecting their share from being applied to their spouse’s tax debt.
Bottom Line
Handling back taxes can be nerve-racking. But, don’t worry – if you’ve a reasonable cause – you might sign up for the options the IRS offers to those facing a hurdle. Remember, for every blocked road, there’s a one-way.
Whether it’s setting up an installment agreement, pursuing an Offer in Compromise, or obtaining Currently Not Collectible status, you do have options when you face back taxes. Each taxpayer’s situation is unique, and the best solution may vary. Assess your financial capabilities, explore the available options, and consult with a qualified professional who knows what they’re doing!