Back taxes is money you owe the IRS for partially or fully unpaid taxes from previous year(s). It is possible to have back taxes at the federal, state and/or local levels. The bad news is back taxes accumulate interest and penalties, and if left unhandled can even lead to criminal charges or seizure of assets.
Back taxes are a consequence of intentional as well as unintentional reasons. The most common explanations why back taxes are assessed by the government include:
- Filing a return yet failing to pay the tax liability
- Failing to report all income earned during the tax year
- Neglecting to file a tax return for a given tax year
Regardless of the intentions, seeking tax help can assist you with getting out of debt. Ignoring back taxes is not a wise decision. Avoidance will only bury the individual further in debt, result in additional fines, risk the loss of vital assets and potentially result in jail time. The IRS penalizes taxpayers that fail to keep up with their taxes in multiple ways, which include:
- A minimum penalty fee of $135.
- Accumulated interest of 5 to 25 percent of the debt per month a taxpayer is late on payments.
- Wage garnishments and levies on financial accounts that allow the IRS to seize up to the total amount owed.
- Liens placed on personal property that inform creditors of the taxing authority’s legal right to the taxpayer’s assets and property.
- Seizure of personal property including your home, automobile, business or other assets.
- Criminal charges pressed against you at the federal or state level, and potential legal fines and/or imprisonment.
The IRS is allowed ten years to report unpaid taxes, so the matter rarely goes away quietly. In addition to all of the other punishments, when a tax lien goes on a debtor’s credit report it remains there for ten years which damages your reputation and inhibits everything from applying for a new mortgage or car loan, to receiving investments for your private business.
How do I find out if I owe back taxes?
The IRS will usually contact you by mail if you owe back taxes, however, keep in mind that while the IRS is a massive agency it is also tasked with policing every single taxpayer of the United States. Their response is not always prompt and some warnings slip under the cracks.
The truth is you should already know if you owe back taxes. Did you ever skip filing for a year? Did you fail to report all income earned in a given tax year? If so, it is only a matter of time before the IRS catches on.
However, if you are still not sure yet worried about owing back taxes you may contact the IRS directly at 1-800-829-1040. An even better solution is to speak with a professional tax help service that is less inclined to bully and actually help you with the situation.
How do I avoid serious consequences and pay back taxes?
While you can deal directly with the IRS to settle your debt, it is not the preferred method as the IRS is prone to bully taxpayers that owe money and make countless threats. Yes, it is true people go to prison for failing to pay taxes yet most of these individuals owed the IRS thousands and thousands of dollars in back taxes.
The more viable option is to consult with a professional tax help service. Tax help services provide a fully confidential consultation, and for many services it is even free. Levy Tax & Associates can help understand your particular situation, offer advice, inform you regarding tax relief programs and even help you back file.
What if I cannot pay back what I owe?
So you want to get right with the law but you don’t have the significant funds to repay your back taxes? The federal government offers a Debt Forgiveness Program for individuals like you!
The IRS is not legally allowed to collect more than a taxpayer can afford to pay if any collection action would force a tax debtor into a financial crisis. Consequently, taxpayers can reach an agreement with the IRS and have a portion of their tax debt forgiven under certain circumstances.
In order to get considered for tax relief, you must apply for a Offer in Compromise (OIC). When the IRS accepts an OIC offer, a considerable portion of debt is forgiven and the remaining is either paid off in lump sum or in fixed monthly payments.
The federal government recently expanded its Fresh Start initiative to negotiate with individuals that owe back taxes, so it has never been more suitable to apply for an OIC.
Time to Get Help…
While you can file an OIC and fight the IRS on your own, it is highly advised that you seek the assistance and expertise of a professional tax help service. Levy Tax & Associates can explain the complicated Offer in Compromise as well as help you gather the necessary documentation to file.
For more information, and to set-up a consultation call 1-800-TAX-LEVY or visit: levytaxhelp.com.