Back Tax Problems

Owing back taxes to the IRS can lead to a variety of problems.  Back tax problems can include everything from having your paycheck garnished to having a levy placed on your property.  In many cases, there are underlying circumstances that lead to having owed back taxes in the first place.  Knowing exactly what circumstances caused your back taxes to build up is a key to come up with a plan that not only will resolve your back tax problems but that also will prevent you owing subsequent tax balances in the future.

The most common circumstance resulting in someone owing back taxes is the inability to timely pay off the tax bill in full.  However, ignoring the situation will result in the IRS adding penalties and interest to the assessed tax, making it even more difficult to pay!  It is however, possible to resolve your back tax problem by working out a payment plan with the IRS as soon as possible to prevent your tax bill from growing larger.

Another circumstance under which many people end up owing back taxes is the misconception that there is insufficient time available to resolve the tax problem.  With the demands of life pressing us from every angle, many people are stressed out and come to believe that they just do not have any time to file their tax returns.  As people have so many other things to deal with and find themselves pressed for time, their tax returns go unfiled.  When tax returns are not timely filed, penalties and fees build up, adding additional stress!  Additional tax and penalties can be avoided by timely filing your current tax returns, by filing missing tax returns and by addressing back taxes.  Speak with the IRS or an experienced tax professional about your situation to see if it is possible to work out a payment plan and reduce or remove any of the assessed penalties or fees.

In addition to the IRS assessing additional tax, penalties and interest against back taxes, if tax returns are not filed and if back taxes remain unpaid, the IRS will also start sending notices about unfiled taxes and outstanding taxes owed to the IRS.  These IRS notices are just the beginning of government collection attempts.  Do not ignore these letters.  Ignoring the letters can lead to more collection activity and big trouble with the IRS!

If you continue to ignore the IRS notices sent to you in the mail, the IRS will attempt to secure the money owed to the IRS.  The first step the IRS will take to secure the money owed is to force a Federal Tax Lien against any property you own, which will damage your credit score and will have a negative impact for getting approved for a loan.

The most common collection method used by the IRS is a levy.  A levy is the legal process used by the IRS to seize (take) your assets and your property.  This is an attempt to collect the money owed.  A tax levy can be enforced against any property, vehicles, boats and bank accounts.

The other common way for the IRS to collect the outstanding back taxes is to enforce a wage garnishment.  This is when the IRS takes a percentage of a person’s paycheck.  The money is taken out of each paycheck by the employer and sent to the IRS before the paycheck is given to the taxpayer, until the amount of the tax owed has been paid in full.

The first step to solving your tax problem is to file all tax returns that you are required to file for both the current tax year and for all unfiled back tax years.  The IRS is more likely to work with taxpayers who voluntarily file back tax returns than with those taxpayers who fail to file their tax returns. After all tax returns that are required to be filed have actually been filed with the IRS, a tax settlement may be an option to resolve your IRS back tax liability.  A tax settlement is when the taxpayer works with the IRS to come up with an amount, which is less than the amount of tax, penalties and interest that is actually owed, to pay. Payment plan or Installment Agreement is another way to work on getting back tax liability paid.

No matter what your reason is for owing back taxes, it is best to understand what to expect from the government if the back taxes are not paid.  Avoiding the IRS will only lead to very unpleasant collection actions and more trouble.  Do not avoid the IRS. Working with a tax professional may be a good option to consider.  Experienced tax experts can help you to come up with a solid resolution plan that will address your special circumstances and financial situation, putting an end to back tax problems.