How to Finally Get Rid of Back Taxes
If you owe back taxes, whether personal or related to your business, you know just how heavily it can weigh on your mind. Tax debt can complicate routine financial decisions and leave you sleepless at night. If you owe money to the Internal Revenue Service (IRS), either through delinquent or overdue taxes, you may wonder, ‘How do I get rid of back taxes once and for all?
You’re not alone. It’s estimated that over ten million Americans owe back taxes to the IRS. Once you have accumulated tax debt from previous years, it can be hard to find the motivation to pay it off. You may even feel overwhelmed by the amount you owe.
Not to worry, we’re here to help with strategies to help you gain peace of mind and finally get rid of back taxes. With a plan in place, you’ll be better prepared to tackle your debt and put a stop to aggressive communication from the IRS.
Get Honest About Your Finances
Let’s face it—it’s not easy to admit you’ve fallen behind on the money you owe. Almost everyone has faced the specter of tax debt at one point or another, along with the fear that they might not be able to pay it back. If you owe money to the IRS and your back taxes start to accumulate, you can quickly fall behind, or become overwhelmed.
In this scenario, many taxpayers are tempted to look the other way. You may ignore letters or screen phone calls from the IRS, knowing you don’t have the money to get rid of back taxes for good.
Make no mistake, this is why the IRS is so aggressive in recovering unpaid taxes. If they let taxpayers avoid payment altogether, they risk losing significant income. In essence, the IRS sees you as guilty, until proven innocent. As a result, their communication is often filled with intimidation tactics.
If you want to get rid of back taxes, your first step needs to be an honest assessment of your total debt picture. How much do you owe to creditors? What percentage of your total debt are your back taxes? Can you pay the IRS quickly, or do you need a team of professionals to help you negotiate a settlement?
With a clear picture of your overall debt and an understanding of your cost of living, you’ll be better prepared to consider the next steps to get rid of back taxes for good.
Set Up an IRS Payment Plan
There are cases in which the IRS will allow you to pay your tax bill through a payment plan. These plans are made by application, for back taxes owing. The IRS offers both short-term and long-term installment plans.
Keep in mind, if you make use of these payment plans, you will still need to pay interest and late penalties until your balance is zero. If you owe more than $25,000, your payments will need to be made via automatic bank withdrawals.
Apply for an Offer in Compromise
An Offer in Compromise (OIC) is a form of tax relief that allows you to reach a settlement with the IRS regarding your back taxes. If you qualify for an OIC, you could negotiate with the IRS to pay a smaller amount than they claim you owe.
An OIC is often used when a taxpayer has few or no assets that could be sold to pay back taxes, and when a tax bill would impact their ability to afford day-to-day expenses. Alternatively, an OIC can be used if paying the bill in full would cause the taxpayer financial hardship.
It is important to note that, to qualify for an OIC, you need to be current on your tax returns and not in an open bankruptcy proceeding. You’ll also need to pay both a non-refundable fee of $205 and an initial, non-refundable payment. Once you have applied for an Offer in Compromise, the IRS will suspend its collection activities.
Keep in mind, the IRS accepts fewer than half the number of OIC applications it receives. If you decide that an OIC might be right for you, it is helpful to enlist the support of a team of trusted tax professionals, especially those with a strong track record.
Ask for “Currently-not-Collectible” Status
If the IRS determines that you can’t pay your taxes (if the payments would make it difficult to pay your basic living expenses), you may qualify for a reprieve called the Currently Not Collectible (CNC) status.
To qualify for this break in payments, you will need to prove financial hardship to the IRS. Keep in mind, penalties and interest will continue to accrue on your outstanding tax balance. Further, if you request CNC status and owe more than $10,000, the IRS will likely file a tax lien, as a matter of public record.
This temporary solution isn’t for everyone. While it puts a short-term hold on your taxes owing, your debt remains intact. If the IRS determines that your financial situation has improved, you will be expected to resume payments.
Find the Right Team of Professionals
As you can see, when you’re ready to get rid of back taxes once and for all, the route forward might not be as clear as your intention. Unless you have the cash available to simply pay your outstanding taxes, there are IRS policies to understand, forms to fill out and details you may need to reveal or prove.
Remember, IRS agents are generally interested in two things: collecting money and closing cases quickly. If you can get rid of back taxes by prioritizing IRS payments over other bills, you may be able to manage a payback plan on your own.
If you need time to pay your tax debt, however, or if you disagree with the amount the IRS says you owe, it is important to have an experienced tax team in your corner. Tax professionals will help ensure your peace of mind and the most direct route forward. They are not only up to date on current tax laws, but also understand the best ways to work with the IRS.
An effective team will negotiate on your behalf and potentially reduce your overall tax burden. In other words, you don’t have to face the stress of accumulating back taxes alone.
At Franskoviak Tax Solutions, we have helped thousands of clients with tax planning for more than 30 years. We provide comprehensive tax services with first-class expertise and a personalized, boutique-style approach. Speak to our team about personal and business taxes, IRS tax deadlines, payroll taxes, IRS tax relief and tax problems such as IRS tax notifications, payroll tax debt, delinquent taxes and more.
Start with a free consultation—we’re here to help you communicate with the IRS, negotiate on your behalf and help you figure out how to get rid of back taxes, once and for all.