We help clients solve tax problems every day at Tax Resolution Services! We wanted to share this question from a tax client (and our answer) because it is a situation that many people may find themselves in:
Question: I’ve really screwed up. Before the recession, I followed some bad tax advice, and now I owe quite a bit of money in back taxes. And that’s not all. The economy has killed my business, and I’m barely making ends meet. I don’t know how I can pay a tax bill. What can I do?
Answer: Yours is a difficult spot, for sure. But you should take some comfort in knowing that you are not the only U.S. taxpayer in this situation — and in the fact that you have a number of options.
Your first course of action should be to consult a qualified tax professional. He or she will analyze your previous returns — a process that will include an examination of how this previous bad tax advice affected you — and then figure out exactly how much you owe in back taxes. This process by itself usually results in a deduction of taxes owed, as the qualified tax professional will often find mistakes in previous filings.
Once you know exactly how much you owe the IRS, you and your qualified tax professional can discuss options with a federal tax agent. If you qualify for the program, the Offer in Compromise might be your best bet. This is a program designed specifically for consumers in your situation — taxpayers who owe a substantial amount in taxes but cannot pay the tax debt, even over time. The Offer in Compromise can result in a significant reduction of your tax bill.
But not everyone qualifies for the Offer in Compromise. If you do not, you still have options. One of the best is the Installment Agreement. This is for taxpayers who cannot pay their tax debt in one lump sum — but can pay that debt over time. With the Installment Agreement, taxpayers make a small monthly payment that over time will eliminate their tax debt. Think of this like a car payment — substantial enough to pay down the debt but not so substantial that it alters your lifestyle significantly.
More Tax Help, IRS News and Tax Relief Tips:
- 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
- If You Owe the IRS Back Taxes, There Are Tax Relief Options Available
- Settle Tax Debt with the IRS Offer in Compromise Program
- Pay Off Tax Debt with Offer in Compromise or Installment Agreement?
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