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IRS Back Taxes

Back IRS Taxes

A large percentage of individual taxpayers and business with serious tax problems specifically owe back taxes. Before we describe this tax problem it is important to clarify that the phrase “back taxes” can refer to a single year of returns you may owe taxes on, multiple years of returns or for penalties and/or interest imposed by the IRS for one or more taxable events. In any case, taxpayers use this term to describe what is a wide range of problems. It is also important to stress that the solutions available for this general tax issue are varied and an analysis of your specific situation is recommended. The rest of this page describes tax problems associated with unpaid tax debts, your options and how many tax problems of this nature are worked to an equitable and fair tax resolution.

Problems associated with unpaid tax debts.

Most people believe that failure to file or filing taxes and not paying will possibly result in minor penalties and interest. While this may be true, if you fail to file, the IRS maintains the authority to file what is referred to as a “substitute return” on your behalf. When the IRS files a substitute return on your behalf, they use information supplied to them by employers and other resources to generate a return for you. They do not pay particular attention to your exemptions or deductions because they do not know exactly what they are. The real result is that your tax owed, calculated by the substitute return, will more than likely be overstated. You will receive a demand letter from the IRS for a tax debt higher than what you typically would have to pay. Failure to pay the debt means you’ll face penalties and interest for a tax debt that may be substantially larger than if you filed the return with the help of a tax professional.

Assume the IRS files a substitute return on your behalf and you still do not pay the required tax debt. This will trigger a cascade of negative events such as tax liens, tax levies and potentially IRS wage garnishments. Understand that the IRS does not require a court order to levy your accounts, seize your assets or demand your employer pay the IRS a specific amount of your wages on a monthly basis directly.

The IRS takes very seriously the swift repayment of taxes owed. As evidence of this claim, please review the following page regarding top ten tips for paying back taxes on the IRS website: http://www.irs.gov/newsroom/article/0,,id=172694,00.html. According to tip number one, if you are unable to afford to immediately pay the tax debt, the IRS suggests you obtain a loan rather than make installment payments. If a government agency tells you to get a loan to pay a debt you owe you should probably take their advice pretty seriously as the rest of the aforementioned article describes penalties associated with not paying the debt promptly.

Your Back Tax Options.

If you read through the verbiage on relevant pages of the IRS.gov website regarding past due taxes, you will find consistent statements across all publications, pages and articles that indicate you need to pay the tax immediately by any means necessary, whether that’s by taking out a loan or borrowing funds from another individual. Needless to say, you do have options and you do not need to rely upon the IRS filing substitute returns on your behalf. Your options begin by contacting the IRS direct and speaking to a Revenue Agent or by consulting a tax professional such as an Enrolled Agent or a competent tax attorney that specializes in tax mitigation specifically.

If you would like a free consultation from an Enrolled Agent with 30 plus years of experience, call IRS Tax Relief Now, Inc. at (888) 332-8959. Our team of tax advisors will analyze your specific tax problem(s) and recommend a course of action that is customized for your individual needs.

How most tax problems are solved.

The reality of most tax problems, as it pertains to individual taxpayers and businesses, is that they are unable to pay required tax debts in full. That is why they fail to pay the required amount on time. While many tax settlement advertisements claim they can settle tax debts for a fraction of what you owe to bait you in to calling them, you should first understand that most workouts come in the form of payment arrangements. So how do tax professionals reduce the overall tax debt(s) owed?

Recall that the IRS will file substitute returns on your behalf and the tax debt could potentially be overstated. One form of reducing your overall tax is to re-file. Tax professionals, familiar with the voluminous tax code, will help you find exemptions and deductions that many tax programs or Revenue Officers will overlook. This can help you reduce the overall tax debt.

Another source of reducing the overall tax debt, in the case of multiple years of returns causing the taxpayer problems, is to pull tax transcripts for all years in question, review your tax returns for multiple years and re-file thereby reducing your overall tax debts for multiple years. If your tax debt can be reduced to an amount you can pay in full the problem will be solved. If you still cannot afford to pay the reduced, overall tax debt, a competent tax professional can then negotiate with the IRS to obtain an installment agreement that you can afford. Installment agreements are one of the most commonly used forms of repaying tax debts that individual taxpayers and businesses cannot afford.