What Should be Done About Back Taxes?

If a person is not 100% sure how much they owes the Internal revenue service, then it would be a smart idea to consult a professional accountant. An accountant can help a person evaluate how much money is owed and give an individual good guidance on how to deal with future tax returns. Once an individual has determined how much money needs to be paid in back taxes, they may formulate a plan for paying off the back tax bill in full.

There is more than you way to back a back tax bill. The Internal revenue service has back tax papers on their official website that must be filled out with the tax payment and sent in. The perfect option would be to pay the back tax bill in one shot, as that way one will not accumulate late payment fees and enlarged interest rates. Unfortunately, this is not an alternative for many people and while a person may take out a loan to pay back taxes, this may not be the best course of action.

A person who cannot pay the back tax bill immediately should contact the IRS and work out either an installment agreement or compromise agreement. If the Internal revenue service agrees to an installment agreement, then one might be able to pay back a small portion of the money due every month. However, a person who works out this type of agreement with the Internal revenue service might need to make sure to pay the whole amount due on time, as there can be negative consequences for not doing so.

A compromise agreement is much more difficult to figure out than an installment agreement. In a compromise agreement, the Internal revenue service agrees to give up some of the money it is owed and a person only has to pay a portion of their back taxes. This agreement is a “last resort” if you has no hopes of ever repaying the back tax bill. In addition, the Internal revenue service will only consider a compromise agreement if an individual is looking at harsh financial hardships and/or it is not apparent just how much a person has to pay in back taxes. Eric Niehaus

In : Taxes

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