Do You Owe Back Taxes To Uncle Sam

If you owe back taxes to Uncle Sam, then you are certainly not alone. According to the IRS Enforcement and Service Results for Fiscal Year 2009, the IRS collected over 48 billion in delinquent revenue.

That’s quite a bit of money owed to our favorite uncle. If you too have back taxes that the IRS is trying to collect, what are your options?

The commonsense answer, and yet the one most often ignored, is to contact the IRS as soon as you realize that you have a debt that cannot be paid.

Many individuals feel the need to wait until they can satisfy their balance in full before contacting the IRS. Others find themselves in an apparent unmanageable tax situation and simply stop filing returns.

The IRS encourages taxpayers to take responsibility for the fact back taxes are owed to Uncle Sam, and to be forthright about resolving it. If April 15th rolls around and you cannot make a full payment, one option is to send in your tax return with a request for a monthly installment agreement using IRS Form 9465.

Don’t wait for the IRS to start generating balance due notices. If you file a return showing a balance, then you shouldn’t need the IRS to remind you of it. Call the IRS and discuss your situation. The IRS generally can grant up to four months for an extension of time to pay. If you need more time, an installment agreement can be established. You have an option of making the payments yourself, through your employer, a direct debit from a checking account, or paying electronically through irs.gov.

What if you can’t pay anything at all?

The IRS will work with you and advise you of what your options are if you are in a financial hardship.

Depending on how much is owed, the IRS will perform a financial analysis of your income and expenses. You may be asked to verify certain items. If your allowable expenses exceed your income, the IRS will temporarily hold collection of your balance in abeyance until your financial situation improves.

If you owe a smaller amount, and if your income is only from Social Security, unemployment, or if you are not employed at all or even have a severe medical condition, then the IRS can put a temporary hold on collection without going through a detailed scrutiny of your finances.

For those who are faced with a large, insurmountable tax debt, the IRS Offer in Compromise program may be your best option. Referred to in radio and TV spots as the “pennies on the dollar” approach, the Offer program is actually designed for taxpayers to prepare and submit themselves. Third party tax resolution firms charge $1,000 or more just to prepare one. Contact the IRS directly to see if you are a candidate for this program.

No matter what option you may be entitled to take advantage of, the IRS will not be able to extend any kind of payment plan until you are current in the filing all of your tax returns. A taxpayer must be in compliance with their legal filing requirements so that the IRS can effectively resolve all potential balances at one time.

Work to get all your returns filed, and call Uncle Sam to discuss your situation and to resolve your back taxes.