How to Pay Less in IRS Back Taxes

Last updated on May 8, 2023

Paying back taxes is a rather simple process if the taxpayer in debt is capable of handing over the entire back taxes amount to the IRS. If you wish to pay less in back taxes, there are IRS plans and relief programs that you may qualify for.

Back Taxes Relief: Reduction or Removal of IRS penalties

Every taxpayer, irrespective of their financial condition, can try to get a reduction or removal of the penalties the IRS charges on tax debt. Usually, penalties on tax debt start with 0.5% and can reach a maximum of 25% of the total tax debt amount. They are charged each month or part of a month the tax debt remains unpaid. Even after a taxpayer has begun to make payments in installments to pay the full tax debt, the IRS will continue to charge penalties on the back taxes amount that remains to be paid.

To get relief from penalties, you must have a “reasonable cause” for the non-filing or non-paying of taxes. A “reasonable cause” is one that impacted you negatively and over which you had no control. For example, theft, flooding, death in the family, fire, divorce, and sudden illnesses. If you can convince the IRS with your reason for non-compliance, they may reduce or entirely forgive the penalty charged on your tax debt.

Remember that the decision to accept your “reasonable cause” depends solely on the judgment of the IRS agent reviewing your case. Achieving penalty abatement can mean a substantial reduction in the total tax debt amount, especially if your tax debt amount is large.

Inability to Pay Back Taxes: Tax Debt Reduction

If your financial condition does not allow you to pay the full amount of back taxes, then you may consider applying for a tax debt reduction plan. Offer in Compromise and Partial Payment Installment Agreement are two popular IRS tax debt reduction plans. Both these plans can only be used by those taxpayers under tax debt whose financial condition does not allow them to pay the full tax debt.

Before applying for a tax debt reduction plan, it is wise to take professional advice from a tax service or a tax professional. Your tax debt case can have the possibility of getting you extended benefits from the IRS. Therefore, consult an expert to determine which method of resolution will give you the most benefits.

Resolve Early to Pay Less in Back Taxes

The simplest method to pay less in back taxes is to avoid penalties and interest by resolving your case at the earliest opportunity. The IRS has designed its tax debt rules to encourage early resolution, and because we need to comply with the IRS rules, it is best to use them to your advantage.

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