How To File Your Back Taxes
There are 4 steps that you should follow when you are filing your back taxes which can be quite tricky at times. So you’re finally in a stable enough situation that you can finally fill those back taxes that once looked impossible. If you don’t pay tax for 10 years, your taxes will become nullified. But in the time period of 10 years, the IRS can take several steps like lien’s, levies, and increase their penalties which will further increase your financial strain.
Step 1: Prepare
To complete your tax return, obtain valid copies of all important documentations in order to prepare your tax return efficiently. If you don’t, the IRS will prepare a substitute copy for you that is a compilation of all the taxes you are entitled to in the last 7 years.
Why is it better to compile your own taxes than use the IRS’s? Well, this is mainly because they apply no deductions or credit which will result in you owing them a lot more tax. If you are having a hard time finding viable documentation to support your claim, it is recommended that you contact the IRS for the information you need. Documentation such as a W2 or 1099 is needed to support your claim of deduction when you turn in your tax documents.
Step 2: Choose The Right Back Tax Assistance
After you have gathered all the needed tax documents, get in touch with a professional tax manager or any other tax professional. When choosing a professional for your taxes, it’s best to choose a firm that can negotiate and file tax returns for you. Not only will it decrease the time it takes to file the tax return, but you’ll also reap the highest possible reduction value.
Step 3: Work with The Firm
Since you only have to fill in taxes for the last 7 years, your tax professional can contact the IRS on your behalf and let them know you will finally be filling in your delinquent tax returns. Though in hindsight it may seem like you are paying the tax firm quite a lot, in the long term you will soon realize that you are saving more than enough for the firm to pay for itself. You will know how much you owe the IRS after you file your tax returns.
Step 4: Understand Options to Reduce and Pay your Tax Debt
If the total sum of the taxes is too much for you to pay, consult with your tax firm to come up with ways to reduce and pay your taxes. You can try filling in an OIC, Offer In Compromise, but you may not be liable or the IRS might believe you can’t pay the OIC either.
If you and your tax professional believe that you can’t pay your tax readily, then you can try and file for a Partial Payment Installment Agreement which mostly come with a 60 month time window to pay your tax debt. If you owe more than $25,000 in tax debt then your tax professional can fill out the Form 433F and Form 9465 in your stead.
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