Do You Owe Back Taxes?

Last updated on April 19, 2013

The best time to resolve back taxes is the right after you discover you owe. If you are able to pay the entire amount in a single payment, which is the easiest method to resolve back taxes, it is highly recommended you do so. However, if you owe taxes of past years as well, or cannot pay your 2012 tax debt amount in a lump sum, you will need to apply for an IRS debt payment plan.

Those who cannot pay the entire back tax amount or any amount they owe can also resolve their tax issue by applying for an appropriate tax debt payment plan. The IRS has many debt payment plans depending on how much and how quickly taxpayers can pay back on their tax debt.

The most common plan taxpayers apply for are anInstallment Agreement, an Offer in Compromise, Currently Not Collectible and a Partial Payment Installment Agreement. Taxpayers should seek out the most suitable payment plan before applying for a program, as the IRS charges penalty for applying for a plan taxpayers have no chance of qualifying for.

Efforts should be made to achieve the earliest resolution of back taxes because of penalties and interest the IRS charges each month for unpaid taxes. With time, the amount of back taxes increases, making it difficult for taxpayers to pay it back.

Postponing the payment of back taxes exposes taxpayers to IRS collection actions, such as a tax lien or levy. When a taxpayer begins to receive notices from the IRS regarding back taxes, efforts must be made to resolve the issue or pay back the taxes owed to prevent seizure and/or sale of assets. Instead of waiting for the IRS to approach you, it is in your interest to approach the IRS.