I owe back taxes help!

Discussion in 'Personal Finance Q & A' started by Bizzy_Lizzy, Jul 19, 2016.

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  1. Bizzy_Lizzy

    Bizzy_Lizzy Newbie

    I owe back taxes help! I owe money to the IRS, I'm not happy about it and didn't realize I owe the money as I was not on the best of income and thought I would ineligible for taxation. I've been naive and now I owe back taxes and the IRS are becoming more and more aggressive. I now need help with paying back taxes. I owe federal tax and state tax and I am in a mess. I owe more than 10,000 dollars and need a strategy to get out of this mess. I do have an emergency fund but I don't want to use it because I worked to hard to save money. I feel like Will Smith in the Pursuit of Happyness. Please help, I'm desperate!
    Quentin and Simrin like this.
  2. Simrin

    Simrin Newbie

    I owed back taxes once and it wasn't the nicest of experience, the IRS are relentless in their pursuit of back taxes, too relentless I think.

    First thing you need to do is to find out if you really owe the back taxes because the IRS can make mistakes too! Look carefully at your tax returns and look for errors. You also need to see if deductions or credits you were expecting are calculated correctly. Filling out the form incorrectly can lead to higher taxes so you need to be meticulous when you check the completed tax returns.

    If you still owe back taxes after checking your completed returns then you must take action. You must minimize your interest and penalties. You need to contact the IRS and ask for an abatement of penalties, when you write the letter explain why you have not paid the back taxes. If you've made a honest mistake and it seems as though you have the IRS might just waive the charges and interest which means you don't have to pay more than you have to.

    Once you've got a handle on your owed back taxes you need to pay the bill as soon as possible. If you cant pay the bill then ask for a Installment Agreement Request so you can make regular payments to the IRS. As you owe less than 25,000 dollars the IRS must allow you to make regular payments without adding charges and penalties. To be eligible you and your spouse must not have a previous agreement within the last 5 years.

    You could also try a Offer in Compromise (OIC) which means you can settle your back taxes for less than you owe. An OIC is like a delinquency or bankruptcy because the offer you make must be as much as your net worth. This should only be use as a last resort.

    If everything is still confusing you must get help from an expert. Seek a charity which specializes in helping low income families owed back taxes. You must not ignore the IRS because they have the power to make your life very miserable.
  3. Quentin

    Quentin Newbie

    Owing back taxes is an emergency and you should use your emergency fund to pay the tax off as soon as possible. Don't take out high interest debt to pay tax because you'll end up in a deeper debt hole. Also don't be tempted to take money out of retirement accounts because you'll regret it when you're older. Just remain calm and work with the IRS to get yourself out of trouble. This means going through the tax returns with a fine tooth-comb, asking for an abatement, requesting and payment plan and finally a OIC (Offer in Compromise). You can get out of this mess but you need to get focused.
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