Is it possible to consolidate 3 years of back taxes? Or would we have to pay on each one indiviually?

Answer 1

Not to be used as a substitute for legal advce.

The IRS will assess penalties on each of the three years (assuming this is a federal issue, but the state will do the same thing if this is related to state taxes). There are penalties for a failure to file and a failure to pay. Once the final total owed has been assessed, you can make payments on the total due. The IRS will be able to help you as far as making payment arrangements. Note that interest will still accrue until the entire balance is paid in full.

Answer 2

Unfortunately, no. You'll need to assess the taxes, penalties and interest for each of the three years that the taxes weren't paid. The "interest meter" starts running from the date that the taxes were due, so it would be impossible to consolidate the taxes because the due dates aren't the same.

That said, depending on your situation, you might be able to make an "offer in compromise" to the IRS, if there are mitigating circumstances that prevented you from paying 3 years of back taxes. Also, if you don't plan on paying the balance in full, be sure to specify to the IRS that you're making a payment against the taxes first, then any remaining balance against penalties and interest due. Otherwise, the IRS automatically will put the payment against the penalties and interest, which will really increase the amount of time it takes to pay down the loan.

Since I don't know your exact situation, your best advice is to find a top notch CPA in your area to go through the specifics. This advice should give you an idea of what to expect during a conversation with an accountant.