Due to this pandemic situation, many people face financial issues, and therefore, they cannot pay their back taxes. If you are one of them, just don’t simply close your eyes. If you have received notification from the IRS about your back taxes and penalties and the due date is near, you need to do something about them.
The IRS has offered various relaxations and loopholes for citizens who cannot pay hefty amounts. If you have proper knowledge about these relaxation programs, you can save yourself from the worst scenarios. You can also ask Coast One Tax Consultants about the tax relief methods.
How to know about your total back taxes?
Every US citizen is a taxpayer. If you have filed your taxes, you need to pay them. If you don’t file your taxes, the IRS can easily find out about it and may charge you with various penalties. The IRS can also charge you back taxes if you don’t pay your taxes on time.
Therefore, you should be aware of your due taxes. You can have information about your back taxes by making an online account at the IRS, and your unpaid taxes will be displayed on this public account with their due dates.
You must know that making an account on the IRS site is complex as you have to upload a heap of information. For this process, you can ask any tax professional or take help from tax relief companies.
How to get IRS help with back taxes?
You are wrong if you think that the government has just left you alone with your substantial taxes. Taxes are imposed for the betterment of the whole nation. If a citizen cannot pay the penalties due to a shortage of resources, the government gives relief through various programs. If you need IRS help with your back taxes, you can apply for one of the following programs, depending on your eligibility.
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IRS installment agreement
Installment agreements are generally known as payment plans. When a taxpayer cannot pay his back taxes on due dates, he can request the IRS for a payment plan. You can deliver your debts in a decided period following this payment plan. The IRS offers two payment plans, i.e., short-term and long-term, depending on your debts and your resources. You can make installments of your whole debt following these plans and then pay them every month.
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Long-term payment plan
Long-term payment plans let you pay your back taxes in more than 120 days. You can be eligible for this plan if your total debts, including your taxes and penalties, are not more than 50K USD. You can negotiate with IRS officials about the entire duration in which you can pay your taxes quickly.
For long-term payment plans, you need to apply first. If you pay through automatic withdrawals, you need to pay $31 for an online application. For applications through phone and emails, you need to pay $107 as an application fee.
In addition, if you are not using automatic withdrawal, you need to pay a bit higher for the application. For online applications, you need to pay $149, while for applications through phone or mail, the application fee will be $225.
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Short-term payment plan
Short-term payment plans let you pay off your debts within 120 days. To be eligible for this payment plan, your debts, including your taxes, must not exceed $100,000.
There is no application fee for short-term payment plans, and you can apply easily through phone, mail, or in person.
You should know that you don’t get rid of your installments until you pay all your debts. If you are late paying your installment, the IRS can add to your back taxes. Moreover, for debts more than $25,000, you need to pay through automatic withdrawals. If you are using debit cards, you will be charged 4% of the processing fee, while on credit cards, this processing fee will be charged 2% per payment.
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Offer in compromise
IRS also relieves you of your taxes by providing an “Offer In Compromise.” Mostly, the taxpayers try their best to avail this offer because once their application is accepted, they will be able to pay fewer taxes than they owe.
The IRS does not accept this offer easily until and unless you prove with solid evidence that paying these hefty amounts will make you bankrupt or financially unstable. To request for offer in compromise,
- You need to apply with an application fee of $205. This fee is non-refundable, whether your OIC application gets accepted or not.
- You also need to submit 20% of your total tax as your initial payment or first installment. After that, you need to pay your total tax within 5 to 6 months.
- You also need to file all of your current taxes.
- You should not be bankrupt while filing for the application.
- You must wait until the IRS accepts your offer. If received, the IRS returns any money you pay more than the settlement sum during the five months.
- After two years of your request, it gets accepted automatically if the IRS does not respond within two years.
- If your offer gets rejected, you can appeal again for it within 30 days.
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Currently non-collectible status
If you face critical financial issues and have no money to pay your taxes, you can ask the IRS to put you in “Currently Non-Collectible Status.” It means the IRS can’t collect your taxes for now. For this, you need to request the IRS through an application. The IRS will then check your financial status and your income level. The IRS will put you in that status after confirming that you are currently eligible for non-collectible status.
This does not mean you will never pay your taxes. The IRS will check your financial status every two years. Once you are financially stable, you need to pay your taxes.
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Penalty abatement
If it’s the first time you are late in paying your taxes and were not able to pay your taxes due to a valid reason, the IRS can remove your back taxes. You need to prove that under natural disaster or due to illness, you couldn’t pay your taxes on time. The IRS will inquire about your situation, and once it’s confirmed that you are innocent, your back taxes will be removed.
Need help to understand back taxes legal matters?
If you don’t know much about legal matters and the available options to choose to remove your back taxes, you can seek help from tax relief companies. These firms will provide you with a free consultation and suggest the most appropriate method for you to remove your back taxes.
Further, tax firms can do this for you if you need to negotiate with IRS officials to remove your back taxes or to prove your poor financial conditions. They will talk with the IRS as your representatives and let you win IRS relief programs.
