How to Resolve Back Taxes Owed to the IRS: A Burbank CPA's Guide

Understanding Back Taxes Owed to the IRS

The burden of back taxes can feel overwhelming for many individuals and businesses in Burbank, California. Whether you are a self-employed professional or a corporate entity, knowing how to navigate your tax obligations is crucial. This article will outline effective strategies to resolve back taxes owed to the IRS while providing specific guidance tailored to residents in the Los Angeles area, including neighborhoods like Toluca Lake, Glendale, North Hollywood, Studio City, Pasadena, and the entire San Fernando Valley.

The IRS has specific regulations and processes for resolving unpaid taxes, and understanding these can save you time and money. Here, we’ll break down a step-by-step approach for addressing back taxes, including the necessary forms and deadlines.

Step 1: Assess Your Tax Situation

Understand How Much You Owe

Firstly, gather all documents relating to unpaid taxes. Review IRS notices, tax returns, and relevant income documents to calculate the total amount owed. If you have multiple years of unpaid taxes, you can request a Tax Account Transcript from the IRS, available through the IRS website.

Review California State Taxes

In addition to federal taxes, consider state tax obligations and any potential penalties from California’s Franchise Tax Board (FTB). For individuals, this can include CA Form 540 for personal income tax. Businesses should be mindful of California payroll taxes and obligations under forms like DE-9.

Step 2: Determine Your Options

Once you know how much you owe, you can explore various options to settle your debt:

1. Full Payment

If you are in a position to pay your back taxes in full, this is the quickest resolution. Ensure that you include any interest and penalties when calculating the total amount.

2. Installment Agreements

If full payment isn’t feasible, consider setting up an Installment Agreement. This allows you to pay your tax liability gradually over time. Form 9465 is the application form you will need to submit to request this.

3. Offer in Compromise (OIC)

An OIC allows you to settle your tax debt for less than the full amount owed. This option can be appealing if you can demonstrate your inability to pay the full amount. To qualify, complete Form 656 and provide financial documentation, including your assets and income.

4. Currently Not Collectible Status

If paying any of your tax debt would cause financial hardship, you could request to be classified as Currently Not Collectible. This can temporarily halt collection activities, but it’s usually necessary to provide documentation demonstrating your financial situation.

Step 3: Formalize Your Plan

Once you've selected your path to resolution, it’s time to formalize your plan with the IRS:

• Contact the IRS: Call the IRS at 1-800-829-1040. Be prepared to provide personal information, such as your Social Security Number, to verify your identity.
• File Necessary Forms: If you’re opting for an Installment Agreement or OIC, ensure you fill out the respective forms and provide any required financial documentation.
• Stay Current with Taxes: To negotiate a resolution, you must remain current on your taxes, meaning you need to file your returns and pay any taxes that become due while you are settling back taxes.

Local Resources in Burbank and Beyond

For residents of Burbank and its surrounding neighborhoods, local resources can assist you in navigating tax resolutions. Many CPA firms, including Calculus Tax, specialize in tax resolution services. Their expertise can help demystify the process and provide strategic advice tailored specifically to your situation.

Step 4: Monitor Your Progress

Monitoring your plan’s progress is essential to ensure compliance and avoid any further issues:

• Documentation: Keep detailed records of all communications with the IRS and any payments you make toward your tax resolution plan.
• Respond Promptly: If the IRS sends any follow-up communications, respond promptly to avoid complications.

Step 5: Seek Professional Help

If at any point you find the process overwhelming or are unsure of how to navigate your situation, seeking professional help is a wise option. A Burbank CPA firm like Calculus Tax is well-versed in local tax laws and can offer tailored advice to help you resolve your tax obligations efficiently and effectively.

Conclusion

Resolving back taxes owed to the IRS doesn’t have to be a daunting task. By assessing your situation, exploring available options, and seeking professional assistance when needed, you can work towards alleviating your tax burdens. For Burbank residents, leveraging local CPA expertise can provide you with the confidence to tackle your tax issues head-on.

If you’re ready to take the next step in resolving your back taxes, reach out to our skilled team at Calculus Tax for personalized guidance and support. Don’t let back taxes hold you back any longer!