Filing Back Taxes

For taxpayers who owe delinquent taxes, the prospect of contacting the Internal Revenue Service (IRS) in order to settle the matter can be quite daunting.  Nonetheless, depending on your circumstances, you may be able to negotiate a settlement with the IRS with respect to your back taxes through the offer in compromise process.  If you are successful in settling your back taxes with the IRS, you may end up paying a lesser amount of taxes to the IRS than you actually owe.

Filing Back Taxes

In order to begin the settlement process with the IRS, you must first complete and submit IRS Form 656 – Offer in Compromise.  Along with Form 656, you must pay a $150 application fee, and submit a completed IRS Form 433-A – Collection Information Statement.  Once you have submitted these required forms, the IRS will undoubtedly request additional financial information from you, as well as written documentation of your financial situation, such as paycheck stubs, bank account statements, and credit card bills. Ultimately, the offer in compromise process allows you to suggest an amount that you will either pay in a lump sum, or pay over a period of two to five years, in order to settle your tax debt in full.  The amount of your offer should be based on the “realizable value” of your current assets, plus any amounts that the IRS might be able to take from your future income.  Furthermore, you will not even be considered eligible for offer in compromise consideration unless there is doubt that the IRS will be able to collect the tax bill from you, doubt as to whether you owe the tax bill, and/or exceptional circumstances that would place an economic hardship on you if you were to pay the entire tax bill.

Back Tax Settlements

The IRS also takes certain special circumstances into account in determining whether to accept a settlement offer regarding a delinquent tax bill.  For instance, the IRS may be more likely to accept your proposed offer in compromise if you are over the age of sixty (60), you have physical or psychological conditions that will negatively impact your ability to work and support yourself, or if you have drug or alcohol-related problems.  You can make the IRS aware of these special circumstances by writing a letter or statement to the IRS, and attaching it to IRS Form 433-A - Collection Information Statement.  If you are claiming special circumstances based on a medical condition, you will want to attach statements from your doctor or healthcare provider to support your claim.

Rejected Back Tax Claims

Even if your settlement offer is initially rejected by the IRS, you can resubmit an amended offer in compromise within a month, or even an entirely new offer at a later date.  If you are amending your offer, you should be sure to specifically state what you are changing about your offer, such as the amount of money that you are offering to pay toward your tax liability.  You are entitled to obtain the report from the IRS in which your initial offer was rejected, which may help you to better prepare a new offer in the future.  If you attempt settlement on multiple occasions without success, you also have the right to formally appeal the rejection of your settlement offer, which you must do in writing within thirty (30) days of the date of your rejection letter. 

Tax Attorney Help with Back Taxes

Navigating through settlement negotiations with the IRS can be difficult and overwhelming for the average taxpayer.  Therefore, contacting an experienced tax attorney to represent you before the IRS can be most beneficial to you.  Especially when you are facing a large tax liability, and/or potential seizure of your assets, engaging the services of a tax attorney to negotiate with the IRS may be in your best interest.