Best Methods to Solve Back Taxes

Author：佚名 Source：none Hits：50 UpdateTime：2008-10-19 0:00:40


When it comes to settling debts owed to the IRS there are 5 common solutions. It is best that you learn all available options and see what fits your particular back tax situation the best before taking action. Some important factors to consider before deciding what tax debt settlement method to use are your back tax amount owed, tax debt amount, the maximum amount you can afford to pay, the amount of assets (equity) you have, and if you would be able to pay amount in full if you just had more time. Below are the 5 most common methods to settling back taxes.

Offer in Compromise
This way allows you to compromise the tax amount owed for far less than the original amount owed. Whenever you hear the saying, "Settle for Pennies on the Dollar", this is the method that is used. It shouldn't come to a surprise that this is most difficult way to settle with the IRS. The IRS has strict requirements to qualify for an offer in compromise. The purpose of an offer in compromise is to find a compromised amount that works for the tax payer and the IRS. This means the IRS will only settle for less if you can prove it will cost them more to try to get the money from you. This is a good choice if your total assets is less than the amount of tax debt you owe.

Installment Agreement
An installment agreement is the most common method for individuals to settle their back taxes. You will be required to make monthly installment payments of a minimum amount. With an installment agreement you will still have to pay interest on the amounts owed plus and any penalties you may have received, so in the end up paying more than the original tax amount owed. An installment agreement should be used if payments cannot be made in full but you do have the ability to pay them off over time in smaller monthly payments.

Stall the IRS
If you need to buy more time to pay the total amount due this can easily by done by using your understanding of the IRS system to your advantage. When taxes are unpaid it begins the IRS automated notice system. The IRS send a series of automated letters before it begins collections. Typically the IRS sends an original assessment letter stating the amount of tax owed plus any interest and penalties then it will send a series of four CP Letters (Computer notices noted by a CP number in upper right). Know that you have about 3-6 months before IRS takes action if nothing is done, but you will receive interest and penalties on outstanding amounts. To get more time all you have to do is write a letter back to the IRS in response to the assessment notice or CP notices and say that you can't pay at the current time and say you would like a 45 day extension. When 45 days is up and you can't pay, just do it again. Just know that once you receive IRS notice CP-504, you will not have much more time until they take collection actions against you.

Currently Not Collectible
This way won't resolve your tax debts, but it put off collections. When you receive this status, the internal revenue services will check up yearly on you to see if you have the means to pay at another time. One thing to keep in mind here is that the statute of limitations is still running and the IRS has 10 years to collect back taxes from the year they were filed. If 10 years passes and they have not collected, you no longer owe that amount.