Taxpayers that owe back taxes receive an IRS notice to alert them of the amount owed, the due date for payment, IRS penalties and interest, and basic instructions on how to respond. Sometimes it’s easy to take care of your back taxes quickly, but other times, it’s not so simple.
IRS Penalties and Interest
Non-payment of your total due taxes (including late payment) will trigger monthly IRS penalties and interest – something you want to avoid. While these penalties are eventually maxed out, the IRS charges daily interest (typically between three to eight percent).
On the IRS notice regarding payment of back taxes, you will find:
• The original amount owed
• The total penalty charged
• The total interest charged
• The total amount owed after penalties and interest
When the due amount goes unaddressed, the IRS will send a Notice of Intent to Levy and the balance is moving to collections.
If you lose your IRS notice/letter: If you do not have the notice or letter the IRS sent, you may obtain an account transcript to determine whether you owe something, which you can get online or request by completing a Form 4506T.
Unfiled tax returns: The IRS looks to ensure your taxes have been filed in the most recent years. If you missed filing a required tax return for a particular tax year, the IRS could file on your behalf with a Substitute Filed Return. The downside? You could miss out on deductions you would otherwise be qualified for and result in a higher owed tax balance.
If you’re not too far behind: You can file your own returns online. Always keep a copy of prepared returns and proof that you submitted it to the IRS.
If you owe a large amount of back taxes and don’t pay: When your balance goes into active collection, the IRS can file a tax lien for the year you owe the tax debt, garnish your wages or levy your bank accounts.
A tax debt resolution professional can take the weight off your shoulders and deal with the IRS on your behalf. Contact Tax Defense Network’s team of licensed tax professionals to start your journey of eliminating back taxes today.