Taxes are already difficult, and if you fall behind on them, things may get out of hand. When taxes are delinquent or overdue — usually from previous years — they are referred to as “back taxes,” and if you owe them, you may be wondering about tax relief. Here are common options that may help you find relief, as well as guidance on how to file back taxes and how many years you can file back taxes for common tax problems:
- Unfiled tax returns
- Back taxes
- Wage garnishment
- Tax liens
- Tax levies
1) Unfiled tax returns:
Offer in Compromise
If you are unable to make any payments on your tax burden, the IRS may agree to a lower settlement sum through an Offer in Compromise.
Requesting an Extension
If you won’t be able to file your taxes on time this year, you can request a filing extension. Although this allows you extra time to file your return, all taxes owed must still be paid by the original tax date. If you are unable to pay in full, applying for an IRS payment plan may be beneficial.
Reconsideration of SFR
When the IRS files a substitute for return (SFR) owing to an unfiled tax return, you can replace it with a late return. This is known as SFR reconsideration.
Penalty Reduction
A first-time penalty abatement request may entitle you to have your filing and payment penalties waived. Another alternative is to seek relief for a justifiable reason. This is often accessible if you were unable to file on time due to unforeseen circumstances. Penalties and costs will be waived if the application is accepted.
Payment Schemes
You may be able to seek a payment extension or enter into an installment plan to pay your unpaid taxes over time.
2) File Back Taxes
Filing your late tax returns is the simplest approach to address unpaid taxes. If you are owed a refund, keep in mind that the clock is ticking. You have three years from the initial tax deadline to file your return and receive your refund. To minimize future delays, take the following actions when filing your back taxes:
Collect Your Documents
To begin, gather your W-2 and 1099 papers for the tax years you’re filing for, as well as any additional information on income made during that time period. You can also call your old employer or get a pay and income transcript from the IRS (s).
Prepare Your Taxes
Any previous year’s tax returns must be submitted utilizing the relevant tax regulations and procedures for those years. If you employ wrong forms or recommendations, you may end up with even more complications.
Fill out an Installment Agreement Request Form
If you owe taxes on unfiled returns and are unable to pay, you should get into an installment arrangement with the IRS. This allows you to pay your tax bill in monthly installments rather than one large sum.
Request Penalty Reduction
You may be eligible for first-time penalty abatement if you only have one past-due tax return. This might assist to eliminate or decrease the filing and payment penalties that will be imposed on your late return.
Please Submit Your Return
Late tax returns may only be submitted on paper and must be sent or delivered in person to your local IRS Service Center. Make sure to send your return via certified mail so you have confirmation that the IRS received it (s). To minimize misunderstanding or clerical mistakes, each return should be delivered in a separate envelope.
3) Wage Garnishment
Pay down the tax debt completely. The wage garnishment will be lifted once you have paid up your overdue taxes.
Set up a payment plan
You may be able to set up a payment plan with the IRS if you owe less than $50,000.
Submit Offer in Compromise
This enables you to bargain with the IRS and pay less than what you owe.
Make a financial hardship claim.
If you are unable to make any payments toward your tax burden, the IRS may declare you “currently not collectable” and stop garnishing your earnings.
4) Tax Lien
Installment Agreement
If the IRS has not yet filed a tax lien against you, you can avoid negative consequences by entering into a guaranteed installment arrangement ($10,000 or less) or a streamlined installment agreement ($25,000 or less). This allows you to pay down your tax burden over time by making monthly payments.
Offer in Compromise
An Offer in Compromise may allow you to lower your tax obligation. If the appeal is successful, the IRS will release the tax lien if the agreed-upon sum is paid in full.
Withdrawal of a Tax Lien
When the IRS issues a lien against the wrong taxpayer, the claim is usually removed. If you suspect a tax lien was filed in mistake, contact the IRS as soon as possible and seek a review. There are two additional withdrawal options are provided under the Fresh Start initiative.
5) Tax Levies
Request an Installment Agreement
The IRS may agree to settle your tax liability through an installment agreement, which permits you to make monthly payments until the total is paid. If you are authorized, the IRS will lift the tax charge on your property.
Submit Offer in Compromise
Through an Offer in Compromise, you can negotiate with the IRS to settle your current tax burden for a reduced sum (OIC). Just keep in mind that you’ll have to pay off the agreed-upon sum within a certain time range. The charge will be removed if your debt is paid in full.
Show Financial Difficulty
Making a claim for financial hardship is another option for stopping an IRS tax assessment, but it is difficult. You must produce financial documents, such as bank records and pay stubs, to demonstrate that the charge will cause serious financial hardship. If you are authorized, the IRS may place you in a “currently not collectable” position, which means that any collections against you will be halted immediately.
Submit an Appeal
You have 30 days from the date you receive the Notice of Intent to Levy to submit an appeal. An appeal is suitable if you believe the IRS made a mistake in calculating the sum owing, or if you have already paid the debt. If you want to make a spousal defense (Innocent Spouse), you might potentially submit an appeal.
We also assist small company owners who are dealing with tax issues such as unemployment taxes, payroll taxes, and other business taxes. We provide a variety of state tax debt options, ranging from penalty abatement to tax settlement, to assist you when you need it the most.