Question: I need to do my taxes for 2012, and I just don’t know what to do! I owe back taxes already, and I don’t think I can pay them. Now, this year, I’m sure I’ll just add to that tax debt. I don’t see how I can get out from under it. What options do I have?
Answer: Your situation is a tough one, but you’re asking the right questions.
First of all, remember that you are not alone. Thousands of consumers are in your exact situation right now. In fact, due to the economic recession, we’ve seen more and more people in this tough tax situation.
The first thing you should do is to consult a qualified tax professional. You need him or her to analyze your previous returns, finish your 2012 return, and then determine exactly how much you owe. Oftentimes, this process catches mistakes, and you may be surprised to discover you actually owe less money than you think.
But you’ll still owe back taxes, and this is where your options come into play. If you are unable to pay off your tax debt, even over time, you should consider the Offer in Compromise. This program allows indebted taxpayers to make a settlement offer to the Internal Revenue Service that can amount to a significant discount. Now, keep in mind — there are some catches. For one, you need to qualify for the program, and the IRS will determine this by your income and assets. But if you do qualify for the Offer in Compromise, it can be the best and fastest way of getting out from under tax debt.
However, if you do not qualify, you may want to consider the Installment Agreement. This allows you to pay off your tax debt over time by making manageable monthly payments.
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