Settle Back Tax Debt

Unfiled Tax Returns:

Statistics says that every year over 15 million income generating households do not file a Federal tax return. In the majority of cases, individuals do not have to file a Federal tax return. Individuals need to file a Federal tax return or not depends largely on their income, their filing status and their age. In most cases, income is the determining factor. If you are self-employed and earn $400 or more in 2009 or in the relative past you will need to file a tax return. If you are a W-2 Employee (you work for someone else), then the income threshold changes each year. Therefore, if you are in a dilemma that you need to file a tax return or not, then you should think about the minimum income filing requirement as per your age and filing status for that given year which is typically explained in the yearly 1040 instructions provided by the IRS. In regards, to state taxes, one can also browse your local state's income tax revenue website in order to find out the details regarding the filing requirements as these requirements vary from one state to another.

Offer In Compromise:

The IRS realizes that sometimes you end up with an enormous tax debt which you cannot afford to pay. For this purpose the IRS has an Offer in Compromise program, which is a win-win for both the IRS and the taxpayer. The IRS collects the tax debt and gets the taxpayer back into compliance - filing their tax returns and paying their taxes. The taxpayer settles for a reduced amount, often a portion of the amount they owed to the IRS. The process is a bit complicated and the taxpayer must meet the IRS filing requirements and be able to show an inability to pay their tax liability fully.

Currently Not Collectible:

Those taxpayers having a fixed or limited income or who are currently experiencing financial hardship may qualify to be placed in Currently Not Collectible status. If the IRS determines you are Currently Not Collectible, you will be placed in a no-collection status and the IRS won't approach to collect taxes from you. But this status lasts for a period of time; thereby the IRS re-evaluates your ability to pay your tax debt. However, the duration of this period varies but it can last until the statute of limitations expires and the IRS can no longer collect on the tax debt.

Innocent Spouse Relief:

Innocent spouse relief is available only for those taxpayers that have filed jointly for the year they seek relief. When individuals file a joint tax return, both of them are equally liable for all tax, penalties and interest for that particular year. The IRS created innocent spouse relief because they realized that there are times when it would be unfair to hold a spouse liable for the tax liability that was created while filing the joint tax return.

Penalty Abatement:

Penalty abatement is another relief provided by the IRS for the individuals to forgive certain penalties that have been charged on their tax debt. This is one of the most common methods for settling taxes for less than it is owed. In fact, about one third of all penalties assessed by the IRS are abated at a later date, but the interest cannot be abated.

Installment Agreement:

An IRS Installment Agreement (IA), as defined by the IRS, will "allow for the full payment of the tax debt in smaller, more manageable amounts." In other words, you can repay your tax debt over a period of time which is commonly no longer than 60 months (5 years) depending on the type of installment agreement you opt for. In most Installment Agreements, the longer you take to pay off your tax debt, the more you end up paying in the end (more than original balance). There are some other types of Installment Agreements which are above 25k, they are just harder to obtain. Knowing which IA to use and the requirements that are needed to be met is important before going through the steps of how to file an IA. If you are considering bankruptcy as an option, keep in mind that only a Chapter 7 bankruptcy can release you from tax liabilities and is difficult to quality for.

Pay Your Liability in Full:

If you have the ability to pay your tax liability fully, then the IRS expects you to pay it. Many taxpayers feel surprised to find they may have to take a home equity loan, borrow from their retirement or savings accounts or sell assets to pay their debt. If you have certain assets, then the IRS will also look at these assets to determine your ability to pay your tax debt, even if you do not currently have the cash on hand to pay.

Negotiating with the IRS to settle your back tax debt can be a bit daunting experience. The IRS tax code is astonishing in its complexity. Trust IRS Debt Repair CPA Professionals to work for you to negotiate a resolution you can afford to pay. Our tax team will analyze your tax situation and provide you with the best recommendations to settle your back tax debt.