When you fall behind on your taxes, whether they be personal, property or business related, the IRS will use aggressive collection methods against you. It is a very serious matter and can lead to incredible stress and the loss of your assets. Thankfully, you do have options to settle back taxes.
The IRS does want their money, but they are willing to work with you to some extent. The best scenario is to contact the IRS as soon as you realize that you will not be able to pay your taxes by their due date. This shows that you are being proactive and the IRS is much more amiable because of that.
If you are already delinquent and want to settle back taxes, you do need to contact the IRS. You can hire a tax professional to go over your options based on your specific situation, and often times they will even contact the IRS on your behalf.
Some of the options available to settle back taxes are setting up an installment plan. You work with the IRS to come up with a monthly amount that will allow you to pay your debt within five years.
Another option is called the Offer in Compromise. This option to settle back taxes is complicated and it is highly recommended that you do hire a tax professional to assist you with the documentation required. It is basically proving to the IRS that you are unable to pay the total amount owed today as well as within the next 2 years. This includes proving that all of your assets combined are still not enough to cover the amount you owe. They look at your home, automobiles, savings, retirement accounts, and any recreational vehicles etc.
Once you are able to prove all of the above, you will offer a lesser total and prove that you are in fact able to pay that amount. The IRS does have to agree to the lesser amount and payment arrangements will be made. Again this is a very complicated process and can take as much as 2 years to finalize. It really is in your best interest to contact a tax professional if you want to pursue this option.
Another option that doesn’t really settle back taxes, but stops collection activities by the IRS is to prove that you are currently not collectible Basically this means that you will prove to the IRS that you are not able to even make installment payments based upon your current financial situation. The key here is that you will have to re-prove this status every year. If you do start doing better, the
IRS will once again start collection procedures. This option really just delays having the IRS freeze your assets and use aggressive methods of collection activities.
In order to settle back taxes the main thing you need to do is contact the IRS. Either directly or through a tax professional, the lines of communication must be started immediately! The longer you wait the more you will owe, as penalties and interest will continue to increase your balance!