How to Resolve Back Taxes using Payment Plans

If you discovered that you have a tax debt, you can obtain a formal resolution using an IRS payment plan.

Innocent Spouse Relief

If you filed jointly and you found that you owe back taxes because of information reported by your spouse, then you can claim full relief from the payment of the tax debt if:

·      You had no knowledge of the understatement of income that led to the tax debt, and
·      You had no reason to know about the understatement of income.

If both these criteria are met, then the responsibility of paying the entire tax debt may be shifted to the liable spouse. This resolution program is known as Innocent Spouse relief.

Installment Agreements

The IRS allows repayment of tax debts through Installment Agreement (IA) plans. Depending upon the amount of tax debt owed, the IRS has various kinds of installment agreements. You can choose the appropriate plan to pay your full tax debt in fixed monthly installments. 

Offer in Compromise

If you cannot afford to pay your entire tax debt, you can apply for an Offer in Compromise. Before applying, ensure that you do not have property, income or assets that can be put toward your debt. Only taxpayers that can meet only basic, allowable living expenses will be approved for a tax debt reduction.

Currently Not Collectible

If you cannot pay any amount of your tax debt, you can stop all IRS collection actions by obtaining the status of Currently Not Collectible. Regardless of this status, penalties and interest continue to accrue on the tax debt until the ten-year statute of limitations expires.

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