When you owe back taxes, your situation differs from someone who got behind on credit card or mortgage payments. IRS debt collection proceeds in specific ways and needs particular methods of resolution.
The first step the IRS takes once taxes become past due is to begin assessing interest and penalties, which continue to increase if you ignore the situation. You should receive a notice from the IRS detailing the amount you owe and any fines.
Some options for resolution
If you can pay the bill but not all at once, you may ask for an installment plan to let you make monthly payments to pay off the entire balance. For some people, paying off the whole sum would impose significant difficulty, even if split into monthly payments. In such a case, you can make an offer in compromise, asking the IRS to agree to accept a sum less than the total balance and write off the rest. Submitting an offer means filling out an application along with a non-refundable fee. Coming up with a realistic amount with a good chance of acceptance can present a challenge. An experienced attorney can help you figure out the best way to approach an offer in compromise based on your individual situation.
If you incurred back taxes due to an honest mistake or extreme financial hardship, you may be eligible for penalty abatement. You will still need to pay back the taxes, but the IRS may agree to let you off the hook for any penalties.
What happens if you do nothing?
Failing to take timely steps to address IRS debt can cause the government to impose a tax lien on your property, making it impossible for you to sell it until you pay the taxes and affecting your credit score. If you still do not pay, the IRS may proceed to seize property such as your home, vehicles, wages and bank accounts, and sell it to pay off the debt.
IRS communications and paperwork concerning your debt can be difficult to understand. Many people experience confusion about necessary applications, deadlines, and possible solutions. A lawyer knowledgeable in the area of debt relief can advise you as to the best solutions available.