Back taxes are pesky little things that can do more damage to your life than any other kind of debt that you could imagine. Unlike other debt that can be dealt with over time or even with bankruptcy, back taxes can follow you around for years. They can take money out of your wages, hold on to future tax refunds, and even start to put levies onto your personal property. It is important that you take the time to pay off these back taxes as soon as possible, or at least come up with a payment plan that works with the IRS and you, so you can avoid some of these penalties.
When a taxpayer ends up with back taxes, many times they have no idea how they are going to deal with the amount. Perhaps they assumed that the amount would just go away and then years down the road they find out that things have gotten out of control. No matter your financial situation or how big your back taxes may have gotten, it is important to find a good tax professional who will be able to work with you and get that debt paid off. Contact a tax professional in your area to ensure you are getting the best care and attention to deal with those back taxes.
Paying All Off
While paying it all off in full right away may not be possible for most people, it is often one of the best options to lower the amount that you owe. From the moment that your tax debt is late, you are going to be facing fines, penalties, and even interest. The longer the debt goes without being paid, the larger the debt will get. This can quickly add up to making your tax debt unmanageable.
So, if you are able to handle it, make a payment in full right away. This will limit the amount that you will have to pay overall and can get all the issues concerning this debt taken care of as soon as possible. Of course, if you owe a tax debt, you may have trouble making a full payment and there are options that are available. Just keep in mind that you are going to have to pay more over time and the longer you wait to pay it off, the larger the final debt will become.
Making a Payment Plan
If you are not able to make a full payment on your back taxes, it may be a good idea to make a payment plan. This allows you to take off that tax debt in smaller amounts that won’t put such a hardship on you but allows you to meet your obligation. Keep in mind that with using this option, you are still going to have to pay interest for each month that you haven’t paid the debt off in full, but it is still a much better option than just ignoring the debt completely.
To make a payment plan, you will need to contact the IRS and discuss this option. In most cases, they are going to agree to this, as long as you make the payments. Sometimes they may request that you pay a certain percentage upfront to ensure that you are going to keep up with your end of the bargain. If the IRS agrees to the payment plan, make sure that all your payments are on time.
Offer of Compromise
In some cases, it may be too hard for you to pay off your back taxes. For some people, their income may be dramatically reduced with the economy or being laid off. Others may have suffered a disability that makes it impossible to find work that is to the level they were at when they incurred the large tax debt. If you are unable to financially meet your obligations of paying all of the tax debt back, your tax professional can work on an offer of compromise with you.
With the offer of compromise, you will show evidence that you are financially unable to pay the large debt. You will then have to work out an amount that will work with you and whether you would like a payment plan. While it is always best to make a full payment on your debt, it is possible to set up a payment plan with the offer of compromise. This proposal will be submitted to the IRS who can then determine whether they will agree to the offer of compromise.
Making Payments on Time
No matter which of the options that you choose above, it is important that you make all of your current and future payments on time. It is not going to do you any good to promise to make payments and then avoid them; you will just end up right back where you had started in the first place. Always make the payments on time and keep up on your end of the bargain.
Dealing with back taxes is something that can be difficult for many people to handle. There are a lot of rules to follow and the issues that can come from not making these payments can make things even harder. If you are dealing with back taxes, make sure that you talk to a tax professional to get this all taken care of as soon as possible.
