4 Steps You Should Follow to Reduce Your Back Taxes

With the closing of the Fiscal year, you are in a rush for filing your tax returns. Even when you try to file your returns on time there can be instances when you do not file them in a specified time limit. In such a case, the IRS files the return for you and assess the tax. If you are not able to pay the tax in the subsequent returns that you file, then the ‘back tax’ accumulates. In case you may find difficult to pay the due, you can seek back tax forgiveness from the IRS.

To deal with this situation, you can follow the steps mentioned below so as to reduce the amount of back taxes that are due.

1. Analyze your tax return

 To begin with the process, you should first analyze your tax return. You can check for the presence of any errors throughout the form. The errors can be about the calculation of the amount or the penalties imposed. The penalties can include the tax that you have failed to pay or can include the back taxes that you have not paid. If you find this to be the situation, then you should move further in taking the other steps that are required.

2. Request for Penalty Abatement

Moving further in the process, you can take this step when you have penalties in your tax return. If you think penalties are more than the amount of the tax that you actually paid, then you can request the IRS for the abatement of your penalty. Broadly speaking, this means that the penalty that is in your tax return can be reduced. You can write a letter to the IRS explaining why you want the penalty abated. It would help if you specifically ask about the abatement of the penalty.

3. Seek an installment plan

After you have taken the steps mentioned above, you need to prepare the ways in which you will pay your back taxes. The first thing you should do is to request an installment plan from the IRS. However, paying the remaining tax in installments is not possible every year, but it can be the case when you have a hefty tax bill to pay. You can make payments in installments to the IRS if the total tax which excludes the penalties and interest is ,000 or less.

4. Negotiate for an Offer in Compromise

This kind of negotiation takes place in extreme circumstances. When you have a doubt about the repayment of the back taxes, you can initiate an Offer In Compromise (OIC) for that matter. The IRS is open to negotiating. The amount that you offer as compensation, this should be at least as much as your net worth excluding the other debts that you have. This process should be only used as a last resort. Seeking professional help would be preferable in this scenario.

If you are seeking IRS debt forgiveness on your back taxes or taxes due, you should visit the websites of professional tax attorneys.

About This Author

Segal, Cohen & Landis, LLP Joined: May 20th, 2019