Tax Relief from Back Taxes

Tax relief for back taxes refers to a reduction in the amount of taxes owed for previous tax years. This guide will provide the best ways to apply for tax relief.
Tax Relief from Back Taxes
Tax relief for back taxes refers to a reduction in the amount of taxes owed for previous tax years. This can be achieved through various means.
In this article

What are back taxes? Back taxes are any tax money that tax-payers owe to the IRS or state and local tax agencies. The sooner you pay your back taxes, the better it will be for your finances, as interest and penalties pile up on tax debt over time, making you pay much more later on.

You may owe back taxes in the following scenarios:

  • Your employer did not withhold enough taxes from your paycheck or other earnings.
  • You were self-employed but did not pay your estimated taxes.
  • You made an unexpected profit on investments that you did not pay tax for.

Tax Relief on Back Taxes

Tax relief for back taxes refers to a decline in the tax amount owed for previous year. This can be achieved through various means, such as negotiating a payment plan with the tax authority, having penalties and interest waived, or applying for a tax forgiveness program. 

You can apply for tax relief on back taxes through the following ways:

IRS Payment Plans

The IRS may give you a payment plan that lets you pay back your overdue tax bill (plus accrued interest and fees) in installments over a period of time. Taxpayers can apply for an extended short-term payment plan of up to 180 days by contacting the IRS by phone or mail.

If your outstanding tax bill is more than $25,000, then you have to make your payments via automatic withdrawals from a bank account. If you make your payments with a debit or credit card, you’ll have to pay their respective processing fees. 

Offer in Compromise

You might be able to find tax relief through an “offer in compromise” in IRS Form 656-B. This lets you settle your back taxes without high interest or penalty rates. Applicants have to pay a $205 fee and an initial payment which is non-refundable. (Low-income taxpayers may get a fee waiver.)

To determine whether you qualify for an offer in compromise, the IRS will assess your ability to pay, your income and expenses, previous tax returns and how much you have in assets. That said, the possibility of getting an offer in compromise is remote and you must not depend on it.

‘Currently-not-collectible’ Status

If there are valid reasons for you not being able to pay your taxes, you can request the IRS to put your account in “currently-not-collectible” status. The IRS may ask you to prove your finances are as bad as you claim. For that, you will need to supply information about your monthly income and expenses on a Collection Information Statement or for Wage Earners and Self-Employed Individuals form.

Keep in mind though that this form of tax relief is temporary. The IRS reviews your income every year to check if your financial situation has strengthened. It could also file a tax lien against you. In essence, being deemed “currently not collectible” doesn’t make your tax debt go away permanently. 

Hiring a Tax-relief Company

If you’re confused about filling out forms for tax relief, you may take the help of a professional tax relief company. However, if the company loses or delays your application, you will still be liable for your tax debt, interest and penalties with the IRS. Plus, you may have to pay a non-refundable upfront fee to the tax-relief company. It is likely to be a percentage of the tax you owe. If the IRS accepts your offers, the fee can get higher than what you end up saving on your tax bill.

Before applying for any type of tax relief, it is best to consult a tax professional or certified public accountant (CPA). They can give you better personalized guidance about the options to help you get out of tax debts.

File your taxes with Beem. Estimate your Federal and State taxes with Beem’s Tax Calculator. Enjoy tax filing with our 100% accuracy and get the maximum refund. Get started now.

Was this helpful?

Did you like the post or would you like to give some feedback? Let us know your opinion by clicking one of the buttons below!

Nivedita Majumdar

Nivedita Majumdar

A journalist at heart, Nivedita is a passionate storyteller who thrives on informing readers about what matters to them. When not typing away on her keyboard, she is looking to savor new life experiences (on budget)!

This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

Related Posts

Do Homeless People Pay Taxes
Do Homeless People Pay Taxes?
Being homeless is a complicated problem that affects a huge number of people all over the United States. Some of them pay taxes, but not all do. Here's a detailed guide to help through paying taxes for homeless people.
List of Tax Deductions for Lawn Care Business [2024]
Do Nursing Home Residents on Medicaid Need to File Income Taxes?
Do Nursing Home Residents on Medicaid Need to File Income Taxes?
Low-income people obtain health insurance through Medicaid. If you are covered under this program, you may not have to file income taxes if your income is below the filing threshold. Let's read on to know more!
Taxes on game show winnings and prizes: How much tax you have to pay?
Winning at least $600 is likely to result in a 1099-MISC tax form being sent by the awarding entity to both the winner and the IRS. If no form is received, the winner is still obligated to report the winnings value.
60000 after tax
60k a year is how much a month/week/hour after taxes?
If you earn a yearly salary of $60,000, it is crucial to know the amount of income tax you are obligated to pay. Planning ahead and determining the income tax rate on a salary of $60,000 per year can help you efficiently navigate the tax filing process. Calculating how much you owe can be a daunting task, but our blog provides a useful breakdown to help you determine the amount of tax you need to pay this year.
W2 Form 2024: Everything You Need to Know
The IRS requires employers to send their employees a copy of their W-2 form by January 31 or face penalties. Even if you have quit your job, your last employer can send you a W-2 by  January 31 or earlier, in which case the employer has 30 days to provide it.

Get up to $1,000 for emergencies

Send money to anyone in the US

Ger personalized financial insights

Monitor and grow credit score

Get up to 20% on everyday spends

Save up to 40% on car insurance

Get up to $1,000 for loss of income

Insure up to $1 Million

Coming Soon

File federal and state taxes at low cost

Quick estimate of your tax returns

Get up to $1,000 for emergencies

Send money to anyone in the US

Save big on auto insurance - compare quotes now!

Zip Code:
Zip Code: