What Is Back Tax Relief?

What Is Back Tax Relief?

Back tax relief covers IRS programs that allow taxpayers to settle back owed taxes, lower penalties, and pay in a manageable way. Taxes left unpaid are subject to interest and penalties. The IRS offers many types of relief such as installment agreements, offers in compromise and penalty abatement to help taxpayers pay their tax debts. 

 

Common Causes of Back Taxes

Understanding common causes of back taxes can help prevent future issues:

• Underreporting Income: If you have earnings from 1099 work or other freelance and gig income, it can be forgotten and not reported to the IRS; that leads to back taxes.
• Incorrect Withholding: This may lead to a year-end tax bill if too little tax is withheld.
• Missed Deadlines: Failing to file or pay by the deadline due to life events or mismanagement.
• Tax Return Errors: Mistakes like miscalculations or missing information can result in tax debt.
• Financial Hardship: Inability to pay taxes due to finances, such as, losing a job, medical expenses or other troubles may postpone the payment of taxes.
• Life Changes: Big life events such as divorce or birth should change your tax obligation.

 

 

Back Tax Relief Options

Relief Option	Description
Installment Agreement	Pay back taxes in manageable monthly payments.
Offer in Compromise (OIC)	Settle tax debt for less if full payment creates a financial hardship.
Currently Not Collectible (CNC)	Temporarily pause collection activities if you cannot pay due to financial hardship.
Penalty Abatement	Request penalty removal for late filing or payment due to a valid reason, like a medical emergency.
Innocent Spouse Relief	Relief from back taxes resulting from errors made by a spouse on a joint return.

 

When is it Time to Get Back Tax Relief

• Ongoing IRS Notices: Repeated calls or letters from the IRS indicate a back tax issue.
• Building up interest and penalties: If the penalties are high, it can be advantageous to offer some options for relief.
• Challenges with Payment: Experience financial difficulties such as unemployment or medical expenses impacting your ability to pay taxes.
• IRS Collection Actions: Wage garnishment or bank levies.

 

 

Types of IRS Collection Actions on Back Taxes

1. Wage garnishment: Your employer takes part of your pay to use on your debt.
2. Bank Levies: The IRS can take money directly out of your bank account.
3. Liens on Property: These are legal claims against your property, secured due to taxes not paid.
4. Seizure of Assets: Though rare, impounding of physical assets can occur in response to tax non-payment.

 

 

How To Qualify For The Different Back Tax Relief Programs

• Installment Agreements: These are when you can pay the balance in monthly payments.
• Offer in Compromise: This requires you to prove that you are eligible for financial hardship and you cannot pay in full.
• Currently Not Collectible: For individuals with serious financial hardship.
• Penalty removal: For taxpayers with a reason for their action, such as illness or natural disaster.

 

 

How To Apply For Back Tax Relief

Here is how to resolve back taxes if you owe them:

• Know your Relief Options: Find out which program makes the most sense for your particular financial situation.
• Get your Documentation Together: Have income records, expense receipts and any IRS notices in one place.
• Fill out Required Forms: Such as for Installment Agreement request Form 9465, or Form 656 – Offer in Compromise
• IRS Submission: Submit your application and await review from the IRS.
• Track the progress of your application:  Track your application’s progress, and consult a tax professional if needed.

 

 

How Long Does Back Tax Relief Take?

• Installment Arrangements: Usually approved within a week.
• Although an Offer in Compromise can be a great way to save some money, it is not as easy and fast as you would imagine — the IRS usually takes between 6-12 months to review your application.
• Penalty Abatement: Response times vary, generally a few weeks.
• Currently Not Collectible Status: Based on financial hardship that is determined within a few weeks.

 

 

Conclusion

The financial pressure of back taxes can be overwhelming however, the good news is you are not alone! Back Tax Relief — When it comes to back taxes, Dimov CPA is here with the know-how when it comes to negotiating with the IRS or requesting creative penalty abatement options so you can take control of your finances. Call us today to see what relief is available to you!

 

FAQs

 

What happens if I don’t pay back taxes?

If you do not pay your back taxes, you might be hit with fines, interest, garnished salaries, and bank levies. The IRS might also step up enforcement efforts.

Can I settle my tax debt with the IRS?

Yes, if you owe tax debt, It can be resolved with an Offer in Compromise or a repayment plan established to pay the debt over time.

Who is eligible for an offer in Compromise?

If you can demonstrate that paying your full tax liability would create a financial hardship, you may be eligible for an offer in compromise relief.

How can Dimov CPA help me with your back taxes?

We offer IRS negotiation, tax penalty abatement, and personalized tax compliance counseling to help manage back taxes.

How to set up a payment plan for back taxes?

If you owe a tax debt, the IRS can work with you and set up an installment agreement. An agreeable way for most taxpayers who owe money to the IRS is paying monthly payments towards their tax debt.

Can back tax relief reduce penalties?

If you have a good reason why you missed your tax payment deadline, back tax relief options–like penalty abatement–can help bring down or eliminate penalties.

Can I get tax relief if I can’t pay back taxes immediately?

If you cannot pay right now, Currently Not Collectible status can stop IRS collection activities for a limited time.