I hear from people every week who think their tax problem is the end of the world. It usually isn't. I'm Darrin Mish. I've resolved over $100 million in tax debt for clients. Here's what you should know.
Often, I get asked this question. The IRS is an intimidating agency, and they will do anything to collect their money even threaten people with prison. I will answer the question immediately, and then, I will give you some information about the IRS that you might helpful concerning your back taxes.
Can You Go to Prison for Owing Back Taxes?
The constitution expressly forbids the imprisonment of people for debt. No citizen in this country is going to go to jail for owing back taxes. You can go to go to federal prison for attempting to trick the tax collector, or you can get federal prison time for cheating on your taxes.
Again, you cannot be imprisoned for owing taxes and not being able to pay. I hope that takes a huge load off of your shoulders. There are a lot of other nasty things the IRS can do though, but you have options when dealing with them.
Some Options Available to You
If you owe federal or state taxes, you have several options at your disposal. The first option is paying the IRS what you owe in full. If this is not feasible, then you have four other options open to you.
Hardship Suspension
This option gets the IRS to leave you alone temporarily, and your account will be reviewed from time to time to reassess your ability to pay. Despite some peace, interest will keep piling on and get compounded daily.
Installment Arrangements
The IRS lets you make a monthly payment with the idea that the balance will get paid in full within three years. Typically, they want you to take out a bank loan to pay for it. Additionally, interest continues to add up to your account.
Bankruptcy
A Chapter 7 will usually take care of taxes owed, and other options allow you to make monthly payments. A decision like this requires a tax attorney.
Make a Deal
Essentially, you would negotiate with the IRS to take a smaller settlement. It would give you a fresh start and remove tax liens.
No matter what you choose, you should consult with an experienced tax attorney like myself. I can advise you on any option and help significantly with a settlement offer to the IRS. Rest assured though, unless you have committed a crime to avoid paying taxes; you will at least avoid any jail time.