Owing back taxes can be an overwhelming and frustrating experience, especially if you feel you are unable to pay the full amount. The Internal Revenue Service (IRS) does offer options for those who are financially unable to pay, although not everyone will qualify for these debt relief programs. You can also turn to other resources for assistance with back taxes, such as third-party debt relief companies.
Back taxes include any tax amounts you owe from a previous tax year. Some taxpayers are behind on paying their taxes because they can’t afford to pay what they owe, while others might not be aware of back taxes that have been assessed to them. The IRS can audit your previous tax returns at any time and assess a required tax. If this happens, you will receive a mailed notice, but it might still come as a shock if you owe taxes you weren’t expecting to have to pay.
Other reasons you might owe back taxes include:
If you don’t pay your taxes after the IRS sends multiple notices, the amount owed will begin accruing penalties and interest. The minimum penalty fee is $135, although the exact amount will depend on how much you owe. You will also be charged 0.5 percent interest per month that the tax payment is late. If you continue to fail to pay, the interest rate can go up to 25 percent per month, resulting in significant tax debt.
The IRS can take legal action against you to collect on the taxes you owe. Actions include:
Ignoring your tax debt is never the answer. Doing so can significantly increase what you owe, as well as impact your credit score and financial situation.
When you need help paying your back taxes, the first resource is the IRS. This agency offers several debt relief options, including the offer in compromise program and installment plans. If you can pay back the full amount but not all at once, an installment plan might be your best option. Setting up a payment plan allows you to repay the debt over time and will prevent the IRS from applying penalties and high interest rates to your back taxes.
An offer in compromise allows you to make a lower offer to the IRS. If accepted, the amount you offered will be treated as payment in full, eliminating your tax debt. Not all taxpayers will qualify for an offer in compromise. For example, you cannot be involved in a bankruptcy proceeding. The factors that impact whether your offer will be accepted include:
If you do not qualify for the offer in compromise program but are still unable to pay your back taxes, other help is available to you. At Solvable, we connect taxpayers with third-party tax relief experts to provide them with resources and assistance during the process of resolving tax debt. All the experts we work with have high ratings and can help you take care of your tax debt.
Unfortunately, not all tax relief resources are trustworthy. Some are looking to scam honest, hardworking taxpayers, taking their personal information without resolving their tax issues. When you work with Solvable, you can trust that we have fully vetted the tax debt companies we partner with, ensuring your personal information and financial details are safe and protected.
When you submit your information through Solvable, we will match you with a tax relief company that best fits your individual situation. Every taxpayer has unique needs and concerns throughout the process, so we want to make sure you are working with a provider that can resolve the issue while answering your questions and keeping you informed.
In some cases, you might need to appeal your tax debt amount because you believe the IRS made an error or doesn’t have all the information. For example, you might have failed to file a tax return, resulting in taxes, penalties, and interest being assessed. If you have the documentation, you can file an appeal and have the IRS review all the correct information to determine whether the back tax amount is accurate. Many taxpayers aren’t familiar with the appeal process, so working with an accountant or a tax attorney can simplify it.
Even if the amount of back taxes owed is correct, a tax debt relief company can help you reduce the amount you owe or set up a payment plan that works for your situation. When you’re working with one of these companies, they will communicate with the IRS on your behalf to help stop the phone calls, notices, and collection methods that might be negatively impacting your life.
At Solvable, we work with a number of trusted tax debt relief companies to provide resources and solutions to our customers. Some of these include Community Tax, Stop IRS Debt, Honest Tax, J. David Tax Law, Optima Tax Relief, and Tax Defense Network. When you’re struggling under the burden of owed back taxes, you don’t have to face this situation alone. Instead, you can turn to Solvable to resolve the debt and move forward with financial freedom.