Taxes are already complicated enough and things can get even messier when you fall behind on settling them. When taxes become overdue or delinquent from years ago, they are referred to as back taxes. If you owe them, you might be wondering if there is any form of tax relief you can claim. Here are several different options that could help you find some relief as well as some guidelines on the proper ways to file back taxes and for how many years you can file them.
IRS Payment Plans
If you require more time to pay off your taxes, the IRS will probably provide you with a payment plan to ensure you get to settle them all. A payment plan lets you pay back any overdue taxes that have been accrued, including fees and interests, over a period of time through installments. Two IRS payment plans stretch over a short or long-term basis.
- Short-Term Payment Plan: 120 days; $100,000 in combined tax, interest, and penalties.
- Long-Term Payment Plan: 120 days or more; $50,000 in combined tax, interest, and penalties.
Offers in Compromise
There is a term that is called offers in compromise which offers you tax relief. The program allows you to settle your back taxes with the IRS for much lesser than what you owe. According to the IRS, this is the last option you should consider after exhausting every mode of payment or if settling your taxes will land you in financial hardship. This should be your last option as the IRS is more likely to approve a payment plan than offers in compromise. The IRS will first consider your ability to pay, your expenses and income, and how much assets you have in possession before granting any offers in compromise.
Currently Not Collectible Status
If you currently do not have any means to settle your taxes and your living expenses, you can request for the IRS to tag your account under a Currently Not Collectible status. You need to put up this request and you may need to complete a Collection Information Statement to provide proof of your current financial situation so they can determine if it is as bad as you report it to be. Details like your expenses and monthly income are required to be declared in the form.
Things to know about the Currently Not Collectible status:
- This is a temporary tax relief option. Your income may be reviewed annually by the IRS to determine if your financial situation has improved.
- Being tagged Currently Not Collectible does not eliminate your back taxes.
- You may still be liable for a tax lien filed by the IRS.
Working with a Tax Relief Company
Tax relief companies basically help taxpayers who are in distress. They can help you with the process or with filling out various forms. Do note the following factors:
- Most Offers in Compromise requests are rejected.
- Find a reliable tax relief company as your application may be rejected if it gets delayed.
- There may be an upfront fee charged by the tax relief company.
