By Mechel Glass of CredAbility
The slow recovery means many people still struggle to generate income, but they also owe taxes from past years.
The IRS may be more willing than ever to work with delinquent taxpayers, given the widespread financial pain felt by so many. But taxpayers who want extra consideration need to abide by requirements to contact the IRS to let them know what is happening and to file formal paperwork on time.
If you have a job, your best solution may be to work out a repayment plan with the IRS. Last year the IRS announced more lenient repayment terms while acknowledging that many taxpayers are having difficulty making ends meet.
The IRS allows up to 24 months to repay back taxes, but the interest and penalties make this form of borrowing one you’ll want to reserve as a last resort. If you can borrow the money from a conventional source you’re likely to pay less in the long run.
If you recently lost your job and that is a reason why you can’t pay back taxes now, you can request the IRS extend the due date by six months under a provision outline specifically for the unemployed.
If you don’t expect future income to allow you to repay your back taxes any time soon, your next option is to offer to repay a portion of the amount through the “Offer in Compromise,” a solution that works for many taxpayers, although it is up to the IRS to decide what a reasonable compromise is.