Posted by Jim McClaflin, EA, NTPI Fellow

Paying Your Back Taxes

Paying Your Back Taxes

When it comes to paying your taxes, it is always best to pay them back on time. As soon as you get the tax return done, make a payment and consider the matter closed. This may be hard to swallow, especially if you weren’t planning on having a tax bill in the first place, but it can make a big different in how much you are going to owe and even how much the IRS is going to bug you in the future. While being a day or two late might not be a big deal, those few moments could easily turn into months or more, and your life is going to become very different.

Back taxes are any taxes that are not paid off by the due date for tax season. These may seem like small amounts at first, but they can quickly add up and cause you a lot of issues. From the second that these taxes are late and you didn’t file an extension, you could be in a lot of trouble over them. If you are dealing with the issues that come from back taxes, make sure to contact a tax professional in your area to help you get them under control.

Penalties of Back  Taxes

The penalties for not paying off your taxes right away can be pretty stiff. The IRS does not like it when taxpayers don’t pay off their taxes right away and they have some stiff penalties that they are allowed to put towards you for not making the payments. To start, you will face some interest and fees right from the beginning for not paying off these taxes. For each day that you don’t pay off the back taxes, the interest and fees will accumulate and it will not take long for the taxes to cost much more than they were originally worth.

If you let the back taxes go for too long, the situation can get worse. You will not receive a tax refund until the original tax bill is paid, even if you are owed one; the money will simply go to the IRS to pay off your debt. In addition, the IRS is able to take money out of your wages to pay it back and can place levies on your property and personal possessions until they start to see a reduction in your tax bill. Over time, this can start to pay a toll on your personal finances and you may be at a loss for what to do.

Whenever you find yourself in this kind of situation, make sure that you find a good tax professional to be by your side. This professional will be able to look at your situation and determine the best course of action to take care of those back taxes.

How to Pay Back Taxes  Off

There are a few different ways that you can pay off your back taxes, but it is usually best to work with a professional. They will be able to answer all of your questions and ensure that you are getting the best results for your needs. The first option is to pay all of the money back right away. If you are able to do so, this is one of the best options in terms of handling the debt right away and ensuring that you don’t gain any more in interest and fees.

Of course, if you have back taxes you aren’t likely to have money sitting around to pay them all off at once. Luckily, there are still a few options. If you are able to make even small payments on the money, you can work with your tax advisor to come up with a payment plan. Your tax professional will submit this to the IRS for approval. If the IRS approves, you will be able to start that payment plan right away. You must make the payments on time each month though or you could get into trouble again.

Another option is the offer of compromise. This one is a good option if something has happened that makes you unable to pay the full amount, perhaps a disability or other issue along the way. With the offer of compromise, your tax professional will go through your finances and prove your inability to pay the full amount. The point here is to get your final tax bill reduced to something that is more manageable for your current situation. If the IRS approves this option, you can either pay back the new, lower amount or set up a payment plan.

While you are able to do either of these options on your own, it is usually better to work with a professional to get this work done. This ensures that you are coming up with the best options for you to get all of the issues with the IRS to stop. Your tax professional will be experienced with handling this kind of stuff and will take control, and even talk to the IRS for you, to make the process easier.

If you are dealing with back taxes, one of the best things that you can do is hire a tax professional. They will be able to discuss some of your options with you and find the results that are going to work the best for you. Contact our offices today to get started with handling your back taxes right away.

Jim McClaflin, EA, NTPI Fellow
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