If you have back taxes, you’re likely hoping there’s some way you can get help. As it happens, you’re likely in luck. You do have multiple options when it comes to debt relief, including a strategy called consolidation. With that said, here’s how to consolidate back taxes – and more.
What are “Back Taxes?”
Simply put, these are taxes that are overdue or delinquent. But as we say, you have options in terms of dealing with them.
Try to Get a Payment Plan
A payment plan with the Internal Revenue Service can buy you more time to pay your taxes, in addition to interest and fees, of course, which continue to accrue until your balance is erased.
Note that if your tax bill exceeds $25,000, you must make payments automatically from a bank account. If that’s not you, you can make your payments with a credit or debit card. Note, though, that you’ll be charged up to $4 for each debit card payment, and around 2% of the payment if you use a credit card.
Further, to be deemed a low-income applicant, your adjusted gross income must be at or below 250% of the federal poverty level.
Consider “Offer in Compromise”
If you simply cannot pay your tax debt or if doing so will present a financial hardship, an IRS program called “Offer in Compromise” will allow you to settle your back taxes for less than the amount owed. In determining your eligibility, the IRS factors in your earnings and expenditures, your ability to pay, and what you have in assets.
To apply, there will be a $205 nonrefundable fee unless you are low income, and you must be up to date on all your tax returns. You’ll also need to make a nonrefundable initial payment. Further, you cannot be going through bankruptcy, and any tax liens will remain in place until your offer is accepted and you’ve lived up to terms. Further, an application suspends collection activities.
Note, though, that the tax agency accepts fewer than half the requests for such a plan. Try other options first.
Seek “Currently-Not-Collectible” Status
If paying your taxes as well as your living expenses is not doable, you can request that the IRS places your account in what’s known as “currently-not-collectible” status, which delays collections activity. You may be asked to prove your financial state with income and expenses documents. Note here that the IRS can still put liens on your assets.
Installment Payments
Each year, U.S. residents fail to fork over some $458 billion annually in taxes. This is money the IRS intends to get.
If no Offer in Compromise is in sight, a payment plan via consolidation is also a popular approach. Instead of repaying each of your tax debts separately, you can make single monthly payments on the collective sum owed. Of late, Freedom Debt Relief’s advice for Texans in this regard includes this strategy. Struggling under the weight of high credit card utilization levels, plus inflation, Texas residents are increasingly under the gun. Debt consolidation loans may help.
Yes, penalties and interest will continue to accrue throughout your debt’s lifespan, but at least you won’t be required to pay multiple different installment agreements at the same time. Instead, the Internal Revenue Service will lump all your tax debts into a single installment agreement, which is also more convenient.
Note that that consolidation can take up to six years, depending on how much you owe. Also, following consolidation, you still must file new taxes for each fiscal year. If you don’t pay any new liabilities, your installment plan may be invalidated.
If you want to consolidate your back taxes, or use another approach, it’s important to get started today. The Internal Revenue Service hasn’t forgotten about your debt – neither must you. Interest and penalties are accruing as we speak, so this is the time to be proactive.
