BACK TAXES
Back taxes are unpaid taxes assessed by the government (Federal, State, Local). The IRS is legally obliged to send you notices in the mail stating your tax debt amount. Under normal circumstances, a taxpayer receives 5 notices including the initial bill for taxes due. The fifth and final notice usually arrives by certified mail and it is titled "Intent to Levy" and the final notice is usually known as the "Final Notice of Intent to Levy" or "30-day letter". When you receive a final notice, the IRS is allowed to seize property/wage on the 31st day after issuance.
What can I do to resolve them?
If you have started receiving notices, do not wait any longer. The best way to settle back taxes is pay up your liability in full to prevent incurrence of penalties and interests. However, most people are not able to do so due to the high tax liability.
If you have a good reason for falling behind your tax payments, read about more Penalty Abatement. If you feel you were wrongfully billed due to your spouse's actions, you may qualify for Innocent Spouse relief.
If you can afford to pay a little each month, then your best solution might be an Installment Agreement with the IRS. To apply for an Installment Agreement, taxpayer must file all of his/her necessary tax returns.
If you cannot afford to pay at all, you may qualify for a status known as Currently Non-Collectible or an Offer in Compromise. The temporary status Currently non-Collectible, will continue to run until your tax liabilities expire unless your financial situation improves. The IRS will periodically review your financial situation. In order for you to attain this status, you need to prove to the IRS that your monthly expenses exceed your monthly income. A thorough financial analysis is critical in order to achieve this status. An Offer in Compromise is an opportunity for you to settle your tax liability for less than what you actually owe the IRS. It is a solution that works for you if your current financial situation clearly shows that you have no ability to pay your debt in full. It requires disclosure of all your financial information to the IRS, reflecting the inability to pay your liability in full.
TAX DEBT SETTLEMENT
Tax Debt settlement refers to the process where taxpayers settle their back tax liabilities with the Internal Revenue Service (IRS). There are various programs the IRS offers and they are based on the taxpayer's ability to pay and/or financial situation. For instance, taxpayers can be set up on an Installment Agreement, Offer in Compromise etc. All taxpayers need to remain in compliance with the IRS before we can negotiate for you.
To start working on your tax settlement...
- Compliance- Filing and Paying of all taxes
In order to negotiate with the IRS or proceed with a settlement, a taxpayer needs to be in compliance. Taxpayers are required to file all past-due tax returns. In some cases, the taxpayer may not be required to file all returns if his/her income fell below the minimum filling requirement for specific tax years.
OFFER IN COMPROMISE
Recently, the IRS changed the Offer in Compromise terms. In the past, your offer amount has to be paid within 3 months from the date of the written acceptance of the offer. However, the IRS has made the terms more accommodating. You can pay the offer amount in 5 months or less. You can also specify how much and when you want to make those payments as long as it is within the 5-month period.
Types:
- doubt as to collectibility,
- doubt as to liability,
- Effective tax Administration
The IRS will compromise the tax debt based on one of the following:
Doubt as to Collectibility. You doubt you could ever pay the full amount of tax owed.
Doubt as to liability: You doubt the tax assessed is correct.
Effective Tax Administration – You have no doubt the tax assessed is wrong and that it is collectible but an exceptional circumstance exists. To be eligible for a compromise on this basis, you must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.
- Compliance- Filing and Paying of all taxes
Is compliance no longer a processability criterion for OIC submissions?
YES. Compliance is no longer considered a processability criterion for OIC initial submissions. If compliance is the only issue, the offer will still be processed by the IRS. However, IRS will contact you by either telephone or correspondence requesting the delinquent return(s), federal tax deposits or required estimated tax payment(s). A reasonable amount of time will be provided to you to comply. Failure to comply will cause the IRS to return the offer to the taxpayer and retain the application fee, along with all TIPRA payments previously paid. The taxpayer will not have appeal rights to this decision.