As the IRS is known to take drastic action again those who owe back taxes, it can be scary to find out that you have not filed your tax returns properly and therefore owe the IRS money. However, instead of giving in to despair, one should take action and do all in his or her power to pay the back taxes owed in a speedy manner. Ignoring back taxes is the worst thing to do, as the IRS has the power to freeze one?s bank account, deduct money from wages even place a lien on valuable assets such as a house or vehicle.
A person who has discovered that he or she owes money to the IRS should contact a CPA and assess just how much money is owed. An accountant can help a person assess how much money is owed and give a person good advice on how to handle future tax returns. Once a person has determined how much money needs to be paid in back taxes, he or she can make a plan for paying off the back tax bill in full.
There is more than one way to back a back tax bill. The IRS provide free forms for those who owe back taxes and these can be obtained via the IRS website. If one can pay the bill right away, he or she should do so, as delaying payment can result in the IRS placing an interest rate on the money owed or demanding a late payment fee. Unfortunately, this is not an option for many people and while a person can take out a loan to pay back tax taxes, this may not be the best course of action.
A person who cannot file back taxes right away should write the IRS and ask for either an installment agreement or compromise agreement. An installment agreement involves working out a deal whereby back taxes are paid in installments every single month. However, a person who works out this type of arrangement with the IRS would need to make sure to pay the full amount due on time, as there can be negative consequences for not doing so.
A compromise agreement is much harder to work out than an installment agreement. In a compromise agreement, the IRS agrees to waive some of the money it is owed and a person only has to pay a portion of his or her back taxes. One should only ask for such an agreement if there are no chances of ever being able to pay back the full amount that is owed. Furthermore, the IRS will only consider a compromise agreement if a person is facing severe financial hardships and/or it is not clear just how much a person needs to pay in back taxes.
It is important to pay back any back tax owed as soon as possible. The fact is that it is best to file a yearly tax return and double check it for accuracy so that back tax bills do not arise. Thankfully, a person who has made a mistake and so owes back taxes can repay these without having to face drastic consequences. The first step would be to consult a CPA and then contact the IRS as to which repayment option would be the most suitable.
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