The quickest way to settle your Internal Revenue Service (IRS) back tax is to pay it in full. You must include any interest or penalties that accrue on the IRS tax return since it was initially assessed. These can add up quickly and result in thousands of dollars in IRS tax returns. However, most taxpayers do not have the funds available to pay their taxes in full and must settle their debts through one of the IRS settlement programs.
If you can afford to pay all of your IRS tax returns, but not in one lump sum payment, then you should consider an Installment Agreement (IA) with the IRS. An IA is a monthly payment plan to the IRS based on how much you owe and how much you can afford to pay. However, the IRS is only willing to enter an IA after the taxpayer has filed all required federal income tax returns. Therefore before trying to get an IA you should make sure all your tax returns from previous years are on file.
If you simply cannot afford to pay your IRS tax returns, then you may be interested in being placed on IRS Current Unbilled status. To qualify for this type of assistance, you need to prove to the IRS that your monthly income exceeds your required monthly living expenses. The IRS is usually only willing to place a taxpayer into Current Unbilled status after the taxpayer has filed all required federal income tax returns.
If you are completely unable to pay your taxes back, you may be eligible for an Offer in Compromise (OIC). Offer in Compromise is a form of IRS counter-tax resolution. This requires extensive disclosure of financial information to prove to the IRS that it cannot collect the full amount of the tax return the taxpayer is currently owed. Specifically, the Offer in Compromise requires proving to the IRS that it cannot collect your full tax return for four or five years even if the IRS forces the sale of all the assets you currently own. The IRS is only willing to accept the Offer in Compromise after the taxpayer has filed all required federal income tax returns.
If your taxes owed are from several years ago, you may not actually need to do anything to complete your back taxes. This is because the IRS only has ten years to collect back taxes from the date of its assessment. Therefore, if your unpaid taxes are from 1997 or earlier, the IRS may no longer be able to collect those taxes. However, there are events that can occur that will extend this timeframe, such as bankruptcy. To ensure that your tax returns have expired, you may want to hire a tax professional to review your tax accounts with the IRS on your behalf.
As a last resort you can settle your tax returns through a bankruptcy filing. However, there are a number of factors that must be considered before tax returns can be waived in bankruptcy. First, you must qualify for bankruptcy. Second, you need to file for bankruptcy properly. Third, you need to check the age and type of return tax. In general, the recently assessed federal income tax return cannot be waived in bankruptcy. In addition, business-related federal payroll taxes generally cannot be waived in bankruptcy. If you are considering filing for bankruptcy, you should talk to a bankruptcy attorney about whether your IRS tax return can be issued in bankruptcy.