30 May What do you do if you owe back taxes?
Because of the “Taxpayer Bill of Rights” recently adopted by the IRS, you need not fear the taxman. Let’s check out some tips to help settle your back taxes debt and try not to dig yourself into a deeper hole.
Tax Tip No. 1
Please do your utmost to settle back taxes on time and in full. You will avoid penalties and accrued interest. When these penalties accrue, the IRS might not be convinced to give you some leeway to abate them.
Tax Tip No. 2
You have that right to submit more information to the IRS to clarify on less tax owed or seek a basis for penalty relief. Illness and military service are included on those valid reasons. Long-term non-filers are allowed to provide that relevant information most especially if there was or there was no direct involvement dealing with the IRS. This tax agency may not be privy to possible tax credits or qualified deductions for your particular case. They will follow a certain template. The tax liability may be computed as higher than what was actually warranted. This forces the non-filing taxpayer to submit a correct return and achieve a compliant status.
Tax Tip No. 3
A repayment schedule may be negotiated. Interest and penalties still apply during this repayment period. Late payments will not be tolerated by the IRS once a repayment agreement has been signed. This may cause you more trouble or it may even revoke your repayment status if you are found to have missed out on a payment or have been irresponsibly delinquent with such. The IRS may deem you as an unreliable payor should you wish to renegotiate for another repayment scheme.
Tax Tip No. 4
“Innocent Spouse Relief” may be possible because of the noncompliance of your spouse. More information for eligibility may be reviewed with IRS Publication 972 and Form 8857. These cases often review the unreported income of a spouse that wasn’t provided on the return.
Tax Tip No. 5
What might be hypercritical is to have competent representation on hand to properly argue your case. You just might be able to save more money in the long run once you are able to acquire the services of a qualified professional. Check your local or state Certified Public Accountant society for more details. Review with them about who really deals with the IRS on a regular basis. Your state or local bar association might be able to refer you to a tax lawyer as well.
A Low-Income Taxpayer Clinic (LITC) may provide pro bono services if you are not able to afford these services on your own. They remain independent from the IRS, even if funding may be provided from an IRS grant program. The LITC can assist you in seeking proper representation and resolve any issues with your account. Log on to www.irs.gov/Advocate/Low-Income-Taxpayer-Clinics to research on such available assistance within your vicinity.