IRS and State back taxes can cause a lot of strain on your finances if you are not paying them regularly. If you are finding ways to pay them on time, then you are making a wise decision. Not paying the taxes on time will add up more penalties and fees on the tax debt. In order to pay back taxes, you must file tax returns from previous years, or the IRS will submit a “substitute return” for you. This is not good because it includes no deductions. Consult a professional tax attorney who will file your back taxes and represent you or negotiate on your behalf because the IRS and State tax code usually has a complicated procedure.
If you want to pay the taxes on time, here are five simple steps to follow:
Get all the relevant documents such as any deductions you want to claim, and you will need a W4 and/or 1099 and other tax documentation to file back taxes.
Consult a tax firm or an experienced tax attorney who will help you in filing these returns and represent you in negotiation or resolution process.
Work out a method to reduce your taxes, not to see it increasing over the period of time.
Apply for Penalty Abatement if you can prove genuine reasons of not filing for taxes because of sudden death in the family, serious financial strain, sickness or other serious valid reasons. You will be able to get most of the penalties eliminated.
You could also apply for an Offer in Compromise, but the IRS will only accept the reduced settlement amount proposed to them if they feel that you are no way in the situation to pay back the full tax dues.
Next your tax professional will help you find a method to pay them and get it approved by the IRS. If you can pay a lump sum amount whether the penalties were eliminated or not then you can apply for an installment agreement of usually 60 days.
Or a partial payment installment agreement to pay back in smaller increments.
Keep all the records documented in an important folder. If any delay is caused in the payment, then the IRS will try all possible forms of collections like taking away your home, property and car. First you must file for taxes, and then you can apply for any reductions and then try to work out a payment arrangement. Since the negotiation process can often get complicated, consult a professional tax attorney for legal advice.
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