IRS Tax Relief - What Are Back Taxes?

Definition of Back Taxes:

Unpaid back taxes can be a serious issue for many taxpayers who don’t have the means to pay them. The Internal Revenue Service (IRS) has recently turned over the collection of unpaid back taxes to private collection agencies. Taxpayers who lack the means to repay back taxes may often negotiate a lesser settlement with the IRS through the offer in compromise program either directly or through a tax lawyer.

Currently, per IRS statistics, the IRS is approving 42% of all Offer in Compromise applications.

95% of Flat Fee Tax Service, Inc.'s Clients have Received a Successful Offer in Compromise.

One of the most common questions our team will hear during our consultations is “I owe the IRS years of back taxes, what are my options?” Many taxpayers gravitate towards the Offer in Compromise (OIC) program, possibly falling victim to the late night television commercials that claim “we can get you a settlement for pennies on the dollar.”

No reasonable person with back taxes due would pass up the opportunity to settle their back taxes for “pennies on the dollar,” but the reality is those types of resolutions not for everyone. You need to be both qualified and eligible to settle your back taxes. While an Offer in Compromise may work for some, it certainly does not work, or make sense, for everyone.

The good news is the IRS has many other options available to alleviate an individual’s back taxes. If you cannot pay the IRS for your baxk taxes, the IRS will encourage you to charge the extra amount on your credit card. This may be a bad idea, because the interest on your credit card will probably be a lot higher than the interest and penalties the IRS will charge if you reach an agreement with them.

The IRS is particularly focused on the following changes:

  1. Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.
  2. Making it easier for taxpayers to obtain federal tax lien withdrawals after paying back taxes.
  3. Withdrawing federal tax liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.
  4. Creating easier access to Installment Agreements for more struggling small businesses.
  5. Expanding a streamlined Offer in Compromise program to cover more taxpayers.

From a taxpayer’s point of view, it’s great to see the IRS offering more options for Americans struggling to keep up with their tax payments. But if you do fall behind, don’t just stand there – take the following steps to resolve your debt with the IRS.

Suggested Read: Why An IRS Lawyer Is A Good Idea

Always File Your Tax Return

If you owe the IRS an amount that you cannot pay in one lump sum with a return, it is important to file the return anyway, says the best IRS help team at Flat Fee Tax Service, Inc.

This will reduce some of the penalties. “Occasionally clients tell us during our initial consultation that they did not file a return because they were unable to pay the back taxes due. This usually causes them to create IRS penalties that are significantly greater than they would have paid had they at least filed the return.”


Back Taxes - Gets Worse with Age

It is always best to deal with IRS tax problems in a proactive manner. The IRS will not immediately pursue you for delinquent tax penalties and interest. In many cases, it will take months before the IRS begins collection efforts.

At first, IRS collection efforts can seem benign, consisting of the only computer generated letters. At some point, however, the IRS will begin very aggressive enforcement tactics, including the IRS garnishing wages. The IRS will order your employer advising that you have delinquent back taxes and that any wages that would be paid to you should be paid to the IRS.

Go For an IRS Installment Agreement?

We are always surprised to find out how few taxpayers consider entering into an installment agreement to pay off their IRS back taxes if you have the ability and assets to pay your back taxes.

When To Enter Into An IRS Installment Agreement. 

The easiest way to answer this question is to list when an installment agreement should not be used, which is when another option is far superior. As an example, if a taxpayer has a large balance owed to the IRS and can only afford to make minimal installment payments another resolution option is more desirable because the taxpayer would barely be paying off the principal of their debt. That being said, the fact remains that an installment agreement should always be considered, even if only as an interim solution while considering other methods.

Pros: Makes IRS content; prevents IRS from taking further collection action; flexible; almost always available.

Cons: Interest continues to accrue; could take years to pay off your back taxes. You must remember to make payments or else default (not an issue if utilizing the direct debit option).

Stick to Your Payments

Do not fail to make your payments on time to the IRS. If you violate the terms of your payment arrangements, the IRS will attach and seize property that you own, including bank accounts and even the mortgage on your home. However, if you speak with them in the event that you are having problems making your payments, you should be able to work through it.

Get Professional Help For Your Back Taxes

A professional representative can usually be of significant help in negotiating the most favorable possible compromise or installment agreement. That said, beware the “pennies on the dollar” firms or tax relief firms that advertise on late-night television, In many instances, these tax relief firms will simply take a client’s money and perform no or minimal services. Many of these firms have been prosecuted in their states of origin for unlawful and deceptive business practices.

Make sure that IRS collection resolutions are the backbone of their practices. Many attorneys and Certified Public Accountants (CPAs) do tax planning but rarely interface with the IRS. It’s important that your tax relief representative has deep experience negotiating with the IRS in back taxes payment cases.


If you haven’t filed your taxes in many or a few years, you may be wondering what tax relief options you have. You may be surprised to learn that filing your tax returns can be the quickest way out of tax trouble. But you need to protect yourself.

Above all, the one thing you shouldn’t do is to do nothing. Taxpayers who don’t take action will find themselves embroiled in the IRS collection process. 

Did you know? The IRS can and will levy your wages and bank accounts. The IRS will even place a Federal tax lien on your property! If you’ve received an IRS notice about a levy or lien, it’s still not too late to get tax debt help. 

Nobody is saying that the federal government is getting all warm and fuzzy about late tax payments. However, the IRS does offer more programs than ever before for Americans to get back on track with their taxes. The key is to act quickly and find a resolution as soon as possible.

The possibility of losing wages or property is very real. You should take all IRS notices seriously because even if the IRS are the ones who made an error, you are the one who will be paying for it until/unless it’s addressed.