Taxpayer’s Delinquent Tax Guide

If you are a taxpayer who owes back taxes, no matter what the reasons, you do have options available to you when dealing with the Internal Revenue Service commonly referred to as the IRS.

The first option to consider would be the IRS installment agreement, if the amount owed is less than $25,000 then this agreement would be the logical approach. IRS charges between $43 and $105 to process the agreement. In majority of the cases the agreement approval is automatic.

This agreement allows you to pay your full debt in smaller, more manageable amounts. The amount of your installment payments will be based on the amount you owe and your ability to pay that amount within a defined period not to exceed five years.

The installment agreement will require a financial statement listing your assets including your checking and savings accounts. If you do not make your agreed upon payments be aware that the IRS can and often will levy your checking or saving accounts as you have already provided them with the account information.

The specific tax form you will need is tax form 9465 and it provides instructions for filling out the application. Don’t forget your processing fee, which will be determined by your specific financial circumstances.

If you should find yourself unable to pay any amount based on your current financial situation you may request that the Internal Revenue Service suspend any collection activities until you are in a better position financially.

This option or process is called “currently not collectible”. In order to receive an uncollectible status from the IRS you must be able to prove that you do not have any assets that would allow you to pay the tax amounts owed. You must demonstrate that you only have enough money to pay for your basic living expenses. To do this, you must fill out tax form 433-F and this form has to be updated annually.

This option does not eliminate your tax debt and the IRS will restart collection activities in the future if they feel you have the ability to pay.

If you owe more than $25,000 and the likelihood is that you wouldn’t be able to pay it off in any reasonable period of time then you might want to consider an IRS process called “Offer in Compromise (OIC)”. An Offer in Compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer’s tax liability for less than they owe.

Be cautious when it comes to tax settlement firms, these firms charge fees starting at $2,000 or more and there are no guarantees that your offer would be accepted by the IRS. If you get rejected by the IRS, you will have virtually no recourse with these firms.

Be advised that over 80 % of all applications are rejected due to improper planning and taxpayer’s frequent misconceptions.

The last option is called “statute of limitation” which is basically a get out of jail card which means after ten years the IRS can no longer collect on any tax year that is older than 10 years. There are some exceptions so seek professional advice if you are approaching the 10 year period.

In conclusion don’t fret over delinquent taxes as you do have options and the tax service will work with you to solve any tax situation.