If you owe back taxes, there are a couple of routes that you can take. First, you can set up an installment agreement with the IRS. This is particularly useful if you are unable to make a lump sum payment. This will, over time, get you on the right track.
Before setting up an installment agreement with the IRS, make sure that you have filed a tax return for each year in which you were required. There have been many cases where the IRS had claimed that people owed a much higher amount than what they truly owed. This happens to many taxpayers because only their income is reported from the companies that paid them money. Therefore, the IRS had no way of knowing how much your deductions were. You may be able to reduce your tax liability by simply filing your back taxes and claiming all of your deductions.
At a minimum, the payment must be high enough to where your balance would be paid off within 5 years. This payment will include charges for interest and penalties. If you are in a situation in which your balance is far higher than your capacity to pay, then an Offer in Compromise may be a better option. With an OIC, you may be able to negotiate a lower balance than what you actually owe. Like any other creditor, the IRS is sometimes willing to accept less money over receiving nothing.
Communicating with the IRS is necessary, even when things seem overwhelming. The absolute worst thing you can do is to ignore them. Remember, the IRS has the power to put liens on property that you own. This is intended to secure the payment of delinquent taxes that you owe. That being said, you should put a higher priority on paying down student loans and paying the IRS than other creditors such as credit card companies. If the worst case scenario in which you had to file bankruptcy were to take place, you will still owe the IRS. Bankruptcy will eliminate the debt owed to other creditors, but not to the federal government.
Should you get professional guidance, ensure that the specialist you consult is practical. When something seems to good to be real, it usually is. For instance, when you are obligated to pay the Internal Revenue Service fifty thousand and you're making over one hundred grand, you won't qualify for an Offer in Compromise which gets rid of much of your income tax debt. With this illustration, you obviously possess the capability to pay.
Before setting up an installment agreement with the IRS, make sure that you have filed a tax return for each year in which you were required. There have been many cases where the IRS had claimed that people owed a much higher amount than what they truly owed. This happens to many taxpayers because only their income is reported from the companies that paid them money. Therefore, the IRS had no way of knowing how much your deductions were. You may be able to reduce your tax liability by simply filing your back taxes and claiming all of your deductions.
At a minimum, the payment must be high enough to where your balance would be paid off within 5 years. This payment will include charges for interest and penalties. If you are in a situation in which your balance is far higher than your capacity to pay, then an Offer in Compromise may be a better option. With an OIC, you may be able to negotiate a lower balance than what you actually owe. Like any other creditor, the IRS is sometimes willing to accept less money over receiving nothing.
Communicating with the IRS is necessary, even when things seem overwhelming. The absolute worst thing you can do is to ignore them. Remember, the IRS has the power to put liens on property that you own. This is intended to secure the payment of delinquent taxes that you owe. That being said, you should put a higher priority on paying down student loans and paying the IRS than other creditors such as credit card companies. If the worst case scenario in which you had to file bankruptcy were to take place, you will still owe the IRS. Bankruptcy will eliminate the debt owed to other creditors, but not to the federal government.
Should you get professional guidance, ensure that the specialist you consult is practical. When something seems to good to be real, it usually is. For instance, when you are obligated to pay the Internal Revenue Service fifty thousand and you're making over one hundred grand, you won't qualify for an Offer in Compromise which gets rid of much of your income tax debt. With this illustration, you obviously possess the capability to pay.