Tax is a big problem for many Americans. While everyone knows the filing date and what taxes are, it’s not always easy to calculate, save for, or pay your taxes on time.
There is a growing debt of unpaid tax, standing at over $500 million, a truly staggering amount.
The IRS is often feared. People think that if they don’t pay their taxes the IRS is going to come and knock their door down and take their possessions away.
Luckily, that is not the case – at least not right away! If you have back taxes or owe the IRS money, there are a few things you can do to help negotiate and mitigate your situation.
In need of a little tax help? Read on to find out more.
What Are Back Taxes?
Firstly, it’s important to understand what back taxes are. For a super thorough guide from some experts, you can click here. But, to put it quite simply, back taxes are owed, unpaid, or uncalculated taxes.
The filing date for tax returns is April 15th. Most people get this done on time and then pay the tax they owe. However, in some circumstances, this may not be possible.
Maybe you’ve hit financial hardship or are struggling with an illness and either didn’t file your return or don’t have the money to pay the IRS right away.
In these situations, the IRS will calculate what they believe you owe and charge you back taxes. The problem here is that the IRS isn’t particularly friendly with their debt.
If you are charged back taxes, they will quickly add fees and interest, compounding your debt and potentially your fear or worry.
This snowball effect can be a huge challenge for many Americans, leading to all sorts of worry.
Seek Professional Advice
If this happens to you, there are a few things you can do – which will be discussed imminently. However, if it’s too much for you to handle alone or you’re afraid of making mistakes with the IRS and what you owe, you should seek professional tax advice.
Tax professionals will help you file all the necessary paperwork, do all the communication with the IRS on your behalf, and often won’t take any fee upfront or until the case is resolved. There’s nothing to lose and everything to gain.
Let’s take a look at how they may be able to help.
An Offer In Compromise
An offer in compromise (OIC) is a way of offering to settle a certain amount of your taxes whilst leaving the rest unpaid. The unpaid amount is written off, meaning you’ll no longer owe it or be charged interest upon it.
There are a large number of criteria requirements for someone to qualify for an OIC, which is why a tax adviser is probably best placed to help you do this.
This is the only method of tax negotiation where you will have some of your taxes written off.
You likely will need to be facing financial hardships or have circumstances out of your control that mean you can’t afford your tax.
The IRS is not obligated to negotiate with people and can demand full payment, however, despite what you may think, they are not out to put people in financial hardships. It is more than likely they will negotiate and come to an agreement.
Apply For Temporary Delay
If you think you can pay but not until a certain situation, job, or other financial situation resolves itself, you can also apply for a temporary delay.
This does not write off any of your taxes but does put a freeze on what you currently owe. In most cases, you won’t pay any interest during the temporary delay.
Consider a Payment Plan
If you can pay but would like to split the payments over a longer period, you can also apply for a payment plan. These plans allow you to split the cost over short or long terms, depending on your needs.
Be aware though, longer repayment plans incur more costs such as plan setup costs and monthly fees.
However, though it may cost you money, it can be a lifesaver to be able to spread your debt over a year. Just make sure you’re able to save for the next year!
The best thing to do is reach out to a tax advice company that will help you find the best solution for your individual debts and needs.
They are experts in the field of negotiating with the IRS and will give you honest and impartial advice.