Owing 2 Years of Back Taxes - Feeling Terrified About Consequences

Thank you for this info! I had no idea about installment plans. Do you know how much the penalties and interest might add up to while I'm paying it off? And will this affect my credit score?

The IRS charges both penalties and interest until the balance is paid in full. The failure-to-pay penalty is typically 0.5% per month (capped at 25% of the unpaid tax), plus interest that compounds daily (currently around 7% annually). So yes, it does grow over time, but getting on an installment plan reduces the monthly penalty to 0.25%. The IRS doesn't directly report to credit bureaus like a credit card company would, so being on a payment plan itself doesn't impact your credit score. However, if they file a tax lien against you (which typically happens with larger debts or when people don't set up resolution), that would affect your credit. Getting on a payment plan prevents this from happening.

How does that work? Does it just give you advice or does it actually help you communicate with the IRS? I'm in a similar situation but I'm worried about using some random website.

Wait, is this legit? I've never heard of taxr.ai before. How much does it cost? I'm behind about $5k in taxes and getting desperate...the IRS keeps sending me these threatening letters but I can never reach anyone.

It basically helps you understand your options based on your specific situation. It asks questions about your income, expenses, and tax debt, then recommends whether you should pursue an installment agreement, offer in compromise, or hardship status. The best part is it simplifies all the IRS jargon and tells you exactly which forms to file. Yes, it's completely legitimate! They don't directly communicate with the IRS for you - they give you the exact steps to take yourself, which actually saved me money compared to hiring a tax resolution firm. It helped me figure out that I qualified for a streamlined installment agreement and showed me exactly how to apply online.

How does this work exactly? Sounds too good to be true. I've been trying to reach the IRS for weeks about my back taxes.

This seems sketchy. How can some random service get you through to the IRS when millions of people can't get through? I bet they just take your money and do nothing.

The way it works is they use a system that continuously redials the IRS until they get through, then they call you and connect you to the IRS agent. It's like having someone wait on hold for you. When I used it, I got a text when they were about to connect me, and suddenly I was talking to an actual IRS representative! I was skeptical too at first, but it absolutely worked. They don't handle any tax information - they just connect the call. Think of it like a priority pass for the IRS phone line. I was able to set up my payment plan in one phone call instead of wasting weeks trying to get through.

We did file our returns, just haven't been able to pay what we owe. But that's good advice for anyone reading who might be afraid to file! Does anyone know if we should adjust our W-4 withholding for this year to prevent owing more next year?

Yes, absolutely adjust your W-4 forms with both of your employers immediately! If you've been underwithholding for 2 years, you're likely still underwithholding now, which means you're digging a deeper hole. You can use the IRS Tax Withholding Estimator on their website to figure out exactly how to fill out your W-4. Also, when you get on a payment plan for your back taxes, make sure you don't miss any payments and that you stay current on this year's taxes. The IRS will cancel your payment arrangement if you fall behind on current taxes or miss payments on your plan.

DON'T DO IT!! Those companies charge thousands of dollars for services you can do yourself for free or at low cost. I paid $3,000 to one of those places and all they did was put me on an installment plan I could have set up myself online. Total ripoff!