The fastest way to resolve your back taxes from the Internal Revenue Service (IRS) is to pay them in full. You will need to include any interest or penalties that have accrued on the IRS back taxes since they were originally assessed. These can add up quickly and amount to thousands of dollars in back taxes from the IRS. However, most taxpayers do not have the funds available to pay their taxes in full and must settle their debt through one of the IRS settlement programs.
If you can pay all of your back taxes from the IRS, but not in one 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. However, the IRS is only willing to enter into an IA once the taxpayer has filed all of their necessary federal income tax returns. Therefore, before attempting to obtain an IA, you should ensure that all of your tax returns from prior years are on file.
If you are unable to pay your back taxes from the IRS at all, then you might be interested in being placed in IRS Currently Not Collectible status. To qualify for this type of relief, you must show the IRS that your necessary monthly living expenses exceed your monthly income. Generally, the IRS is only willing to place a taxpayer in Currently Not Collectible status once the taxpayer has filed all of their necessary federal income tax returns.
If you are unable to pay your back taxes, you may qualify for an Offer in Compromise (OIC). An offer in compromise is a form of back tax resolution from the IRS. It requires the disclosure of extensive financial information to prove to the IRS that you were unable to collect the full amount of back tax that the taxpayer currently owes. Specifically, the Offer in Compromise requires showing the IRS that you would not be able to collect your full back taxes for four to five years, even if the IRS forced the sale of all the assets you currently own. The IRS is only willing to accept an offer in compromise once the taxpayer has filed all of their necessary federal income tax returns.
If your back taxes owed are from a few years ago, you may not actually need to do anything to resolve your back taxes. This is because the IRS only has ten years to collect taxes from the date they were assessed. Therefore, if your unpaid back taxes are from 1997 or earlier, the IRS may no longer be able to collect those taxes. However, events may occur that will extend this time period, such as bankruptcy. To better ensure that your back taxes are due, you may want to hire a tax professional to review your tax account with the IRS on your behalf.
As a last resort, you can settle your back taxes by filing bankruptcy. However, there are a number of factors that must be considered before back taxes can be discharged in bankruptcy. First, you must qualify for bankruptcy. Second, you must correctly file the bankruptcy. Third, you should look at the age and type of back taxes. In general, newly assessed federal income tax arrears cannot be discharged in bankruptcy. Additionally, business-related federal payroll back taxes generally cannot be discharged in bankruptcy. If you are considering filing for bankruptcy, you should speak with a bankruptcy attorney to find out if your back taxes from the IRS can be discharged in a bankruptcy.