TAX PROBLEMSBack Taxes
Back taxes are taxes — typically from the previous year — that were not paid at the time they were due and remain outstanding.
You can owe back taxes for a lot of reasons, such as:
- Filing a return and failing to pay the amount owed
- Failing to report all earned income during the tax year
- Not filing a tax return altogether
These actions can be intentional — like deliberately underreporting income — or unintentional, like not designating enough money to be withheld throughout the year.
What Happens If I Don't Pay Back Taxes?
If left unpaid, back taxes can accumulate significant interest and penalties over time.
To avoid getting penalized for not filing, we always advise filing your returns on time even if you can’t pay the balance, instead of not filing at all.
Here are the two most common penalties and what they’ll cost you:
- Failure to File: Owed interest plus a 5% penalty for each month the return is late, up to 25% of the overall tax bill. The IRS can even submit a substitute return on your behalf, which may not include any credits or deductions that would offset the amount you owe.
- Failure to Pay: Owed interest, plus a 0.5% monthly late fee.
Depending on the circumstances, the IRS may take extreme measures to get you to pay, such as garnishing your wages, placing a lien on your property and more.
How to Resolve Back Taxes
While owing back taxes can be scary, it’s best to be proactive when it comes to dealing with the IRS. Here are some approaches and strategies that can help to resolve past-due taxes:
1. Negotiate a payment plan with the IRS.
In some cases, you can set up an IRS payment plan, also known as an installment agreement. The terms and conditions of the agreement will depend on the details of the situation, including how much you owe and how long it will take you to pay back the balance in full.
2. Request a short-term extension.
You can also request an extension to pay the full tax balance. There is no fee to request an extension, but the IRS will charge interest and a late payment penalty of 0.5% per month on the unpaid balance.
3. Apply for a hardship extension.
The IRS offers various options for taxpayers in hardship situations. This includes the Offer in Compromise and Currently Not Collectible status. To qualify, you will have to prove that paying the tax would cause significant financial hardship, according to IRS standards.
4. Partner with a qualified tax professional.
Your best option is to work with an experienced tax professional to negotiate with the IRS on your behalf. Navigating the ins and outs of a bureaucratic organization can be quite confusing and messy, and you could wind up paying more than necessary. A seasoned tax expert can guide you through the process and provide a clear path to financial freedom.
Get Help
Schedule a free consultation with one of our tax associates and get your back taxes resolved.
Finding the right tax professional begins with asking the right questions.
Still deciding? Read our Founders Letter to learn more about what we do.
TaxQuotes is a specialized team of tax professionals committed to resolving IRS and state tax issues. As innovators in the tax industry with over 50 years of combined experience, we are experts at resolving a wide range of tax problems, including:
- Unpaid tax balances
- Unfiled tax returns
- Penalties and penalty relief issues
- Underreporter notices
- Business and payroll tax issues
- IRS and state tax issues
Our service costs vary based on the complexity of your situation. The first step is risk free — we get your IRS records, evaluate your situation, and provide a customized resolution plan according to your specific situation. The cost for this service varies but is backed by our 100% Satisfaction Guarantee.
Once we have discussed your situation with you, we will propose one fee to resolve your entire situation. You have no obligation to purchase unless you accept our plan, and you can pay your fees over the time it takes us to complete your case. Your tax consultant can estimate how long your case will take and the fee structure for our services.
Resolution time for tax issues varies based on the complexity of the case. Straightforward matters take a few weeks, while intricate issues may take a year or more. To streamline the process, our team will file a power-of-attorney authorization with the IRS, allowing us to work directly on your behalf.
When you owe back taxes, the IRS offers several options other than full payment. These include payment plans, extensions to pay, and hardship programs, such as not-collectible status and a tax settlement option called an Offer in Compromise. We will evaluate each option with you and get you the best option based on your circumstances.
Absolutely. Our tax resolution experts review your notice, assess your situation and work with you on a plan to resolve your situation. Once you engage us for services, we get right to work with you and the IRS. Our tax resolution specialists stick with you from beginning to end.
Each person’s circumstances are different. Our goal is to get you the best outcome available based on your circumstances. If you owe back taxes, we will review your unique situation for any potential relief.
