Do you owe tax payments to the IRS? Check out our guide for assistance and the options available to you regarding your back taxes.

Did you know that the average tax debt in the US is $16,849? 

If you’re behind on your tax payments, you aren’t alone. Owing back taxes can be daunting, but thankfully there are tax relief options available to you. 

Today we’re going to break down three options you have if you owe taxes.

1. Request a Payment Plan 

Your first option for settling your income tax debt is to arrange a payment plan with the IRS. There are two types of payment plans offered:

Short-Term Plan:

  • Term: 180 days or less
  • Fees: Free to set up
  • Payment Method: automatic checking withdrawal, debit/credit card, or by check/money order
  • Combined Tax Penalties and Interest Owed: $100k or less

Long-Term Plan:

  • Term: 120 days or more
  • Fees if paying by automatic checking withdrawal:
    • Apply Online: $37
    • By Mail, In-Person, or Phone: $107
  • Fees if using an alternate payment method:
    • Apply online: $149
    • By Mail/In-Person/Phone: $225
  • Combined Tax Penalties and Interest Owed: $50k or less

Keep in mind that tax penalties and interest will continue to accrue until your balance is paid off, even if you’ve made a payment plan with the IRS. 

The Fresh Start Program

The Fresh Start Program, also known as the Fresh Start Initiative, is a set of changes that the IRS has made to the tax code to alleviate tax debt for citizens. The goal of this initiative is to help citizens make tax payments in installments without excessive fees or liens.

To qualify for this program, you must meet these requirements:

  • Earn less than $100k/yr for single filers
  • Earn less than $200k/yr for a married couple filing jointly
  • Show a drop in net income of 25% or more if self-employed
  • You owe less than $50k in taxes

If you’d like to learn more about this program, you can do so at https://silvertaxgroup.com/everything-about-irs-fresh-start-program/.

2. Apply For an “Offer in Compromise”

Your second option for settling your back taxes is arranging what the IRS calls an “offer in compromise.” This option is considered if making your tax payments would create financial hardship or you are completely unable to pay.

However, less than 50% of these offers are accepted by the IRS. Exploring other tax relief methods is recommended before attempting to arrange an “offer in compromise” with the IRS.

3. Alternative if You Can’t Make Tax Payments

Since the IRS does not always accept an “offer in compromise,” there is an alternative that you can explore.

You can request that the IRS place your account in “currently not collectible” status if you cannot pay for both your expenses and your income tax. If you pursue this option, the IRS will likely ask you to fill out a “collection information statement” to prove the state of your current finances.

This option is a temporary solution and will not erase your back taxes. Unfortunately, tax liens can still be filed against you while your account is in this status. The IRS will also review your income yearly to see if your financial situation has improved.

Getting Relief From Back Taxes Is Possible

If you’re behind on your tax payments, don’t fret. There are options available to settle debts you have from your tax returns, and if you feel overwhelmed, you can always speak to a trained tax professional.

If you’ve attained tax relief, let us know which option worked the best for you in the comments below.

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