Tips for Settling Back Taxes

If there is one inescapable truth, it is that the IRS will always get what is owed to them. Being in debt to the IRS is no laughing matter. Owing back taxes can ruin your finances for years and even decades. The best way to settle back taxes are to avoid them all together. There are a number of different ways to pay off what you owe to the IRS. The best decision you can make is look at all the advantages and choices at your disposal before choosing a path towards repayment.

Partial Payments

The way most people pay off their back taxes is through monthly partial payments. This choice works in your favor only if you can make the necessary payments on-time each month until the period of time you and the IRS agree upon has ended. In some cases, people have been able to get away with paying less than they originally owed the IRS. However, you could face a great deal of trouble should you miss a payment. Be certain you can handle the amount before agreeing to a payment plan.

Offer-in-Compromise

An Offer-in-Compromise is probably the best way to settle back taxes. You simply offer what you can afford to the IRS and they choose whether to accept or reject your offer. The closer you are to the amount you owe the better chance there is the IRS will accept your offer.

If you can offer at least eighty percent of the original amount then you should be fine. The IRS will review your financial standing and liabilities before accepting your offer. Should the IRS find you could afford the full amount they will likely reject your offer even if it is ninety-nine percent of the original debt owed.

Penalty Abatement

There are two other alternatives for those significantly financially strapped. The first is known as penalty abatement. Penalty abatement is a request you can make to have the IRS completely drop all your tax penalties. The IRS will conduct an in-depth search of your financial standing to see if you are as bad off as you say you are.

After reviewing your financial status, the IRS may eliminate your tax debts altogether. Requesting penalty abatement generally knocks off a good chunk of IRS debt, if it is accepted. If you think you have a case for penalty abatement, you should speak to your tax preparer immediately.

Appeal

Lastly, should your tax problems get bad enough for the IRS to threaten seizure, you should file a Tax Collection Appeal. This will allow you to tell the IRS your financial well is dry and you cannot possibly pay your taxes. The appeal will go to an appeal officer who will look at your financial standing and make a decision in about a week.

Now that you understand what some of your options are you should be better equipped to handle the stressful task of settling your back taxes. Hopefully, you will be able to go back to avoiding back taxes altogether in no time.