For reasons that aren’t worth describing here, I’m in trouble. Whereas I once made six figures, I now make a roughly average income. Worst still, I owe a lot of money in back taxes – taxes owed for when I was making good money. In all, I owe about $127,000, according to an accountant. I don’t have that kind of money! What can I do?
Unfortunately, yours is an all too common situation. American taxpayers who fall on hard times often have difficulty paying their back taxes.
It happens. But it doesn’t mean the end of your life, and it certainly doesn’t mean financial ruin.
The first thing you should do is consult a qualified tax professional. Oftentimes, the amount owed to the IRS is inflated due to a variety of reasons, and there is no reason to offer to pay the IRS any more than you owe, right? A qualified tax professional will analyze your tax returns and determine exactly how much you owe.
Once that figure is determined, you have a number of options. The two I’d recommend you consider are the Offer in Compromise and the Installment Agreement.
The IRS developed the Offer in Compromise after realizing that kinder, gentler enforcement can often be more effective than a beat-down-doors approach. In this program, you and your tax professional meet with the IRS and offer to pay an amount that will essentially eliminate your tax debt. Oftentimes, this program results in taxpayers paying off their debts with pennies on the dollar! The Installment Agreement is a powerful, though quite different, program. With this, you can break up your tax debt in small chunks, paying it off over years the same way you do a car or a home.
More Tax Help, IRS News and Tax Relief Tips:
- If I am not eligible for the Offer in Compromise program, can I enroll an Installment Agreement?
- Since the New Year has rolled around, I’ve made myself a promise: I want to get rid of my tax debt. I owe about $140,000 in back taxes and now earn about $65,000 per year (with no savings). I don’t know where to begin. Can you help?
- What’s the difference between an Installment Agreement and an Offer in Compromise?
- Ask the Tax Resolution Expert - Do I Qualify for the IRS Offer in Compromise Plan or Participating in the IRS Installment Agreement Payment Plan?
- Ask the Tax Resolution Expert: The IRS Offer in Compromise or Installment Agreement Programs May Be Your Tax Debt Solution
Tags: backtaxes, Installment Agreement, Offer in Compromise
