How To File Back Taxes

DebtHelp.com Tip: However you prepare your ‘regular’ income tax return is how you will be preparing and filing your back tax return. There are only a few differences:

• If you are using a substitute tax form, be certain it is in compliance with IRS guidelines.
• Many times, you need prior approval.
• If you are using a substitute tax form, you will be mailing it to their special unit address.
• If you are using an IRS form, be certain it is for the correct year.
• File online, by mail, or through a tax preparer. Be certain you choose the correct year.
• Make certain you are using the tax rate tables in effect for the year you are filing for.
• Make certain the allowable deductions are applicable
• Know the limits and criteria of various credits, expenses, and special tax situation.
• (In short, know the tax laws applicable to the year you are reporting your back taxes).
• Develop any appropriate supporting documentation (schedules, letters, i.e.)
• If you have not filed for multiple years, the IRS usually does not go back further than six years for any examination (audit).
• Remember: The longer you wait to file your back taxes, the more penalty and interest is accumulating on your unpaid tax bill – in general.

Uncollectible Category

DebtHelp.com Tip: Whenever a taxpayer cannot pay their delinquent tax bill, and there is no sign of them being able to, the IRS may put them into the category known as “uncollectible”.

Also known as an ‘undue hardship’ case, the IRS has no promise of collecting their tax debt from someone classified as “Uncollectible”. The taxpayer in this category has little, if any, assets. So, the IRS cannot levy anything. And, the taxpayer has no income beyond that necessary to meet living expenses.

If you feel that you fall into this tax resolution category, notify the IRS. The IRS personnel will prepare a Form 53 which will temporarily inactivate the IRS collection activities. This Form does not stop the interest from accruing, though. It also will not stop you from owing taxes. Only the IRS collection process is put on hold, temporarily.

About once a year, the IRS will re-exam your financial status. You will be required to complete a new Financial Statement (Form 433A). Fill out this form to the best of your abilities. The IRS will research your answers.

The IRS problem resolution method known as “Uncollectible” is the category consisting of taxpayers showing the least hope of ever improving. Taxpayers classified as ‘uncollectible’ do not have any prospects of a more positive livelihood, better training, better education, etc. Taxpayers with large tax debts, falling into old age, poor health, and poor education have a higher likelihood of being classified as ‘uncollectible’ than does a college educated, healthy 20 year old.

Offer In Compromise Defined

DebtHelp.com Tip: Offer in compromise. This IRS tax resolution method has the IRS and you settling your income tax debt at less than the original amount. If you have determined that an installment payment plan would not be beneficial to you, you may apply for an Offer in Compromise. This is one of the last voluntary steps along the IRS collection process. The Offer in Compromise program is sometimes preferred over installment agreements that last years and cost the IRS money plus time.

The Offer in Compromise program compromises your total tax, interest, and penalties for an amount that considers your assets, income, and general ability to pay.

Both the IRS and you can benefit by becoming involved in an Offer in Compromise program. The IRS is collecting some unpaid taxes from you while you are paying less than the original amount owed. You can have the option of paying either in a lump sum or in installments.

This program does not come easy, though. You need to convince the IRS that entering in an Offer in Compromise agreement is the best option for them. Explain this in the cover letter you will need when applying.

Plus, the process is very time-consuming and extensive. There are definite procedures that you and the IRS need to follow in order to enter into an OIC.

Even though the IRS Offer in Compromise is a great way to reduce IRS debt, this tax resolution method is not a quick and easy fix. Sometimes Offers in Compromise can go for years. It is the most complicated and time-consuming of the methods used to collect unpaid taxes.

Unpaid Payroll Taxes

DebtHelp.com Tip: One area which you need to concern yourself about is paying your payroll taxes on time. Be certain that you pay them on time, by the due date, or you will face stiff consequences from the IRS. The IRS may allow leniency regarding other taxes, but current payroll taxes is not one of them.

If you are late paying your current payroll taxes (making your payroll tax deposits), the IRS will shut down your business. Make certain that you make your current payroll tax deposits on time to avoid this.

For past due payroll taxes, you may be allowed to keep your doors open only if you make arrangements to pay off your past due balance.