There are circumstances that arise which may put an individual in a financial hole with the IRS. This can often lead to a California resident owing back taxes to the state and federal government, which can amass quickly if left unresolved. Although the fear of an IRS collection effort may be prominent in many individual’s minds when their tax debt continues to rise, there may be a way to satisfy such debt by making an offer to the IRS.

The IRS is able to agree to compromises on an amount owed and the manner in which it is paid if there is a question as to the debtor’s ability to pay or the amount claimed due is questioned. To initiate such a review, a form must be filed with the IRS that outlines the offer to compromise in coming to an agreement. This offer may include a reduced principle or a payment plan that allows the individual to pay their back taxes back in monthly installments.

In order to effectuate such a compromise, a full financial disclosure must be provided. This disclosure must provide in detail all the income and expenses an individual has. A fee might also be required for the IRS to process the offer.

Negotiating back taxes may not be available to all California residents who are seeking relief. It may be important for this possible solution to be explored, however, as there may be many individuals who are eligible. By examining yet another avenue for individuals who are struggling with their tax debt, there is a possibility for a reasonable conclusion to be reached that can protect an individual as they try and get on top of all of their financial obligations.

Source: The Sacramento Bee, “Ask the Experts: How to pay taxes in installments,” Gregory Burke, Sept. 12, 2012