The Burden of Back Taxes: Understanding Your Options for Relief

Back taxes can be an overwhelming and stressful situation. It can go to such an extent that you can actually feel the burden of back taxes on your back. But what are back taxes anyway, how do back taxes lead to IRS tax liens, and how do professional tax consultant can help you avail IRS penalty abatement?

What are back taxes?

The financial aftermath of delayed or unfulfilled tax payments is referred to as back taxes, which typically pertain to the previous year’s taxes. Late tax payment charges and interest must be completely paid off. Not paying back taxes could result in serious legal consequences such as wage garnishment, IRS tax liens, and other forms of penalties. There are a few reasons why you may owe back taxes, such as not submitting tax returns or neglecting to pay federal, state, and local taxes on time.

Consequences of not paying your back taxes

In the event of unpaid back taxes, the IRS will impose an additional penalty on top of the interest on the outstanding tax debt. The interest rate ranges from 0.5% to 25% for each month the taxpayer is delinquent on paying their taxes. This often leads to difficulties for taxpayers, as their tax debt can quickly accumulate and become unmanageable due to interest and penalties.

If a taxpayer is unable to pay their back taxes, they may face severe repercussions from the government. These could include wage garnishment, legal charges, home or bank account asset seizure, and demands for immediate payment of the back taxes owed. However, there are also options available to taxpayers, such as a voluntary disclosure program, which provides several payment alternatives and allows them to avoid criminal charges.

Understand how much you own.

To find out if you own back taxes then, you can create an IRS individual taxpayer account and check your tax balance at any time. You can sign up for a taxpayer identification number (TIN) with the IRS and access your tax information online anytime. An application for a longer payment plan can be submitted through your account and may result in lower tax debt. The IRS’s detailed requirements can make opening this account seem like a monumental task. In order to get the ball rolling with the IRS, you may want to retain the services of a tax professional who is familiar with working with them.

What to do 

How do you get rid of your back taxes?

To resolve your back taxes, it is important to educate yourself about your options. Speaking with a tax attorney or an official IRS tax professional is recommended, as they can assist you in navigating complex tax regulations. If you have not yet hired a tax attorney, you can request that the IRS temporarily suspend all collection efforts. However, it is important to act promptly to avoid further complications.

  1. Installment Plan:
    • One option for resolving back taxes is through an installment plan, which allows taxpayers to pay their taxes in monthly installments. However, not all taxpayers may be eligible for extended payment plans, as the IRS prioritizes collecting taxes over allowing payment plans.
  2. Programs for Innocent Spouses:

    • Programs for innocent spouses can also provide tax relief for couples who file joint tax returns and where one partner conceals tax liability from the other. This can allow the misled partner to file for tax relief if they can prove that their spouse underreported income, overdeclared expenses, or claimed improper deductions or credits.
  3. Make a tax extension request due to financial difficulty: 

    • Taxpayers who are facing financial difficulties can explore different options offered by the IRS, such as currently not collectible status or offer in compromise. To be eligible for an extension based on hardship, you must provide evidence to the IRS that you are unable to afford the taxes you owe.
  4. Offer in compromise:

    • With an offer in compromise, you can settle your tax debt for less than the amount owed. If you have tax debt and cannot pay it or if doing so would put you in severe financial hardship, you may be entitled to file for bankruptcy protection. For OIC, IRS considers earnings, expenditures, assets, equity, capacity to pay, and more. 
  5. Take a loan:

    • It may be possible to consolidate tax debt by taking out a loan, either on a personal or commercial level. If you get the loan, your payment and interest rate will remain the same each month for the entire term. You may be able to borrow money at a much lower interest rate and pay it back faster than you would pay the IRS their application fee, fines, and interest.
  6. Borrowing money from 401K: 

    • If you owe taxes that haven’t been paid and you qualify for a 401(k) loan, you could consider using the money to pay off your tax debt. This is an affordable and straightforward way to obtain the necessary funds to pay off your taxes. Nonetheless, if you fail to repay this loan, it could harm your retirement savings.
  7. Get help from a professional tax consultant:

    • A tax expert may assist you in reducing the stress associated with tax resolution challenges. Tax consultants are authorized to represent customers in front of the IRS. When looking for the services of a tax expert, be wary of unscrupulous persons who pretend to provide tax consultation services. 

Conclusion

Dealing with back taxes can be a daunting and stressful situation for anyone. Ignoring the problem can result in severe legal consequences, such as wage garnishment, asset seizure, and criminal charges. However, there are options available for taxpayers, such as installment plans, programs for innocent spouses, and offer in compromise. It is essential to educate yourself about your options and seek professional advice from a tax attorney or an official IRS tax professional. Prompt action and communication with the IRS can help avoid further complications and reduce the burden of back taxes. Remember, the key to resolving back taxes is to take action, be proactive, and seek assistance from experienced professionals.

Author

Mr. Joshua A. Webskowski

Joshua specializes in successfully resolving cases in all areas of tax resolution including liens, levies, & other IRS collections cases.

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