Facing IRS back taxes can be overwhelming, but understanding your options and taking proactive steps can make the process more manageable. Many taxpayers have questions regarding tax relief for back taxes, the consequences of non-payment, and the best solution for their circumstances. To help tackle your tax issues with confidence and work toward a resolution we’ve compiled answers to some of the most frequently asked questions about IRS back taxes.
1. How Do I Know How Much I Owe in Back Taxes?
You can check if you owe back taxes by accessing your account through the IRS online portal or by calling the IRS directly. You’ll need to provide your Social Security number, filing status, and other personal details to verify your account.
2. Can I set up a payment plan for my back taxes?
Yes, the IRS provides installment agreements that allow taxpayers to pay their debt over time. Eligibility and terms vary based on individual circumstances.
3. Why Did I Receive IRS Letter 11?
When you have unresolved tax debt the IRS will send you a series of collection notices. If you fail to address your outstanding balance, you will receive Letter 11, which serves as a final warning regarding your tax issue before the IRS takes further action. This may include levying your bank accounts, garnishing your wages, or seizing other property. It is important to understand your rights to a Collection Due Process Hearing as detailed in Letter 11 and to utilize these rights effectively in resolving issues with the IRS.
4. What Is an Offer in Compromise?
An Offer in Compromise (OIC) allows eligible taxpayers to settle their tax debt for less than what they owe. The IRS evaluates your financial situation, including income, expenses, and asset equity, to determine your eligibility for an OIC. If you cannot pay your back taxes in full, or if doing so would cause undue hardship, an OIC) may be an option for you. To apply, you must submit Form 656 and 433-A (OIC) and pay an application fee (unless you meet low-income guidelines), and provide supporting documentation.
5. Can Penalties Be Waived?
Yes, taxpayers can request relief from penalties. The IRS offers penalty abatement through:
- First-Time Penalty Abatement: This is for taxpayers with a clean compliance history for the three years prior to the year of the penalty.
- Reasonable Cause Relief: For those who can demonstrate extenuating circumstances such as medical issues or death of the taxpayer or someone in the taxpayer’s immediate family, fire, other casualty or natural disaster, erroneous advice, or the inability to obtain records may qualify for relief.
When penalties are waived any related interest will also be removed.
6. What If I Can’t Afford to Pay Anything?
You may qualify for Currently Not Collectible (CNC) Status if you cannot pay anything toward your tax debt. This status temporarily halts collection efforts, such as wage garnishments or bank levies. Interest and penalties continue to accrue, and the IRS will periodically review CNC status to determine if you can begin to pay. However, it’s possible the statute of limitations may expire while in CNC, thereby extinguishing your tax debt.
7. Can my Passport Application be Denied if I owe IRS?
Yes, if your tax debt is certified by the IRS as ” Seriously delinquent tax debt” the State Department will deny the issuance of a passport.
8. Can I be Liable for Unpaid Business Payroll Taxes?
Yes, if you are found to be a responsible person, the IRS will assess the Trust Fund Recovery Penalty against you. This allows them to collect the trust fund portion of the payroll taxes directly from you.
9. How Long Does IRS Have to Collect Back Taxes?
The IRS typically has a 10-year statute of limitations for collecting unpaid taxes, starting from the date the tax is assessed. After this period, the debt is generally unenforceable. However, certain actions, such as filing an Offer in Compromise or declaring bankruptcy, can extend this timeframe.
10. Should I Hire a Tax Professional?
While you can apply for tax relief for back taxes directly with the IRS, working with a tax professional such as a CPA can provide several advantages. A tax professional can:
- Analyze your financial situation to determine the best relief option.
- Ensure your application is accurate and complete.
- Negotiate with the IRS on your behalf.
- Help you avoid costly mistakes or enforcement actions.
Get Tax Relief for Back Taxes
If you owe back taxes, don’t wait to address the issue. The longer you delay, the more interest and penalties accrue, and the higher the risk of enforced collection actions. Understanding your options and taking proactive steps can help you regain control of your financial situation and resolve your tax debt.
For personalized assistance, call the tax professionals at East Coast Tax Consulting. They can provide expert guidance tailored to your circumstances. With the right plan, you can tackle your back taxes and move toward financial peace of mind.