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Back Taxes: Your Options

Back Taxes

Most taxpayers file tax returns and pay what they owe on time. If a taxpayer does not pay, the IRS sends the taxpayer a bill. This begins the collection process. When you have back taxes owing to the IRS, it’s always a good idea to speak with a tax lawyer to make sure that you don’s shoot yourself in the foot. Tax law can be complicated, so you’ll need some help.

Along with the bill, which is called a notice, the IRS automatically sends Publication 1, “Your Rights as a Taxpayer”, and Publication 594, “Understanding the Collection Process”. These publications explain the various options and rights taxpayers have in dealing with IRS Collections. The tax lawyers can guide you through your options and can prevent unnecessary and unwanted collection action by the IRS.

What Will the IRS Do If I Owe Back Taxes?

During the collection process, even if you work out a payment solution with the IRS, the IRS may file a Notice of Federal Tax Lien to secure the government’s interest. The lien is required by law to establish priority as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate. Once a lien is filed, it may appear on your credit report and it may harm your credit rating. Therefore, it is important that you work to resolve a tax liability as quickly as possible, before lien filing becomes necessary. Once a lien is filed, the IRS generally cannot issue a Certificate of Release of Federal Tax Lien until the taxes, penalties, interest and recording fees are paid in full.

What Are My Payment Options If I Owe Back Taxes?

There are a number of payment solutions the tax attorneys can secure for you:

  1. Extension of Time to Pay — You may be eligible for a short extension of time to pay of up to 120 days. This might be a desirable option for you if are able to pay the taxes in full within the extended timeframe.
  2. Installment Agreement — In 2004, for example, 2.5 million taxpayers paid their back taxes in monthly payments. Installment agreements paid by direct deposit from a bank account or payroll deduction from wages will help avoid agreement default by ensuring timely payments and will reduce the burden of mailing payments and save postage costs.
  3. Delaying Collection — If you are unable to pay, it may delay collection until your financial condition improves.
  4. Offer in Compromise — Some taxpayers are able to settle their tax bill for less than the amount they owe by submitting an Offer in Compromise (OIC).  However, the criteria for accepting an offer are strict and it is critical that you have an experienced attorney to ensure that your offer has the best possible chance of being accepted by the IRS.

What If I Don’t Pay the Taxes the IRS Says I Owe?

When the IRS sends you a bill, if you do not respond to the first notice or subsequent notices, the account becomes delinquent. Delinquent accounts may be turned over to the Automated Collection System (ACS) or to the Collection field function.  With IRS Collections, the ACS personnel will contact you by telephone to attempt to work out an agreeable payment solution. If the delinquent account requires field contact, a revenue officer will try to resolve the account with you.

If the IRS pursues enforcement action, you still have options. After the IRS files a Notice of Federal Tax Lien, and prior to the IRS initiating levy action, you will be given the opportunity to request a hearing with the Office of Appeals. You also have a right to appeal certain other collection actions. For example, if you request for an installment agreement is denied, you have a right to appeal that determination.

At any time before or during collection action, a taxpayer who believes a pending collection action will create a significant hardship may apply for relief by submitting Form 911, Application for Taxpayer Assistance Order (ATAO). The Office of the Taxpayer Advocate will review the application, and if appropriate, take steps to resolve your problem with the IRS to relieve the hardship.

Free Consultation with a Tax Attorney

If you are here, you probably have a tax law issue you need help with, call Ascent Law for your free tax law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506