Paying off your back taxes is something that you ought to do religiously. If you are not able to pay off your taxes within the time assigned, you still can pay at a later period but make sure you do so without delay. Oftentimes, we have seen that individuals and very responsible taxpayers are not able to pay their tax returns as they have unforeseen financial obligations to fulfill. Nevertheless, the moment you are out of the mess and have some cash at your disposal, the first thing you ought to do is pay off your back taxes.
When your tax returns are delayed by 2/3 months, the taxes are usually referred to as back taxes. So, you must be genuinely in financial hardship to avoid payment of your taxes. The IRS will understand your situation well provided you are able to convince about the same.
When a taxpayer reaches this point when he has fallen behind on payments, tax debt settlement is perhaps the only way he can satisfy the Internal Revenue Service. Now, there are various tax debt settlement methods that you can opt for. In this article, we will emphasize on one of the most sought after tax debt settlement options – Offer in Compromise. Also we will take a sneak peek at the other tax settlement options too. So, read on for more information.
Offer in Compromise
An Offer in Compromise is a tax debt settlement process in which you make an offer of an amount that you think is feasible and will be able to pay up well within the stipulated time period. Whether or not your offer will be agreed upon depends solely on the wish of the Internal Revenue Service. They will either accept your offer if they find that the amount you are ready to pay is very near to the actual amount you owe, or will give you a counter offer or reject your offer outright. So, just applying for Offer in Compromise definitely does not mean that you are through.
Once you inform the IRS about your intentions, the IRS will refrain from collecting the amount from you the hard way. However, the IRS has set stringent norms for qualifying for Offer in Compromise, which you must fulfill.
The other tax debt settlement options that you can opt for (provided they are suitable for you) include Penalty Abatement, Installment Agreement, Partial Installment Plan, and Currently Not Collectible.
Penalty Abatement – When you fall behind on taxes, a considerable amount also accumulates as penalty or late fees. Penalty abatement is when you request the IRS to nullify your penalty amount.
Installment Agreement and Partial Installment Plan – In both the cases, you pay what you owe to the IRS in installments. The only difference is in case of former you have to pay the entire amount as compared to the latter where you will be allowed to pay less than what you owe in installments to the IRS.
Last but not the least is Currently Not Collectible when you request the IRS to defer the collection time of your tax debt amount for a considerable time period.
The writer of this article Steve Anderson is an expert on debt management issues. He also writes on tax debt issues for https://www.newlifetaxrelief.com.