4 Ways to Clear All Your Back Taxes

By Jay Shelvin posted 12-13-2020 01:21 AM


If you earn a living then you have to pay taxes, and the more you make, the more important it is to stay on top of your taxes before they get on top of you. 

If you’re behind on your taxes and want to catch up, read on to find out how. 

  • Payment Plans

The IRS is reasonable enough to extend you a payment plan if you’re behind on your tax bill and are unable to pay back what you owe at once. 

You can either choose the short-term payment plan from the IRS or the long-term payment plan instead. 

Note that you still have to pay late payment penalties and interest until you pay off everything that you owe. 

According to IRS regulations, you’ll need to pay through automatic bank account withdrawals if you owe an amount of $25,000 or more. 

It’s better to avoid paying with a credit or debit card as that will attract processing fees of up to $4 per transaction. 

  • Offers in Compromise

The IRS also offers you the chance to take advantage of an “offer in compromise” as a form of back tax relief. As the name implies, this is a form of compromise where the IRS would allow you to pay less than what you actually owe. 

This option is only available for people who are unable to pay off their taxes at all, due to being in dire financial straits. 

The only issue is that you really need to be eligible for this option in order to benefit from it and the IRS often makes it harder to qualify for it, whereas it’s relatively easier to get a payment plan in place. 

In fact, the IRS has been shown to accept less than 50% of the offer-in-compromise applications that they receive. 

  • Currently not Collectible

It’s also possible to have the IRS classify your account is “Currently Not Collectible”. 

This option is only available to people who can prove that they can’t reasonably pay off their taxes and maintain their living expenses at the same time. 

Should you ask for this as your way out, you’ll need to prove the condition of your finances by completing a Collection Information Statement. 

  • Tax Relief Company

If you’re in a difficult financial situation, then it might be worth it to hire a tax relief company to help you out. 

However, even if you get a tax relief company, your chances of getting an approved offer in compromise remain the same – 50/50. 

Also, you should be careful about the type of tax relief company that you hire because should they lose your application or take long to process it, then you might end up in an even worse position than you were in the first place. 

Keep in mind that you must also pay the tax relief company upfront, which in some cases, may cost you more than the actual tax bill. 

So, be careful when hiring tax relief companies and make sure that it’s really the only option you have at your disposal. 

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