Dealing with taxes can be overwhelming, and when back taxes come into play, it can feel as though you are in over your head. Below we provide you with a guide that will help you understand important aspects of your back tax issues.
Back Taxes vs. Tax Debt
Back taxes are essentially unpaid taxes that individuals or businesses owe to the government. So it’s essentially tax debt.
Back taxes can accumulate for various reasons, such as failing to file tax returns, underreporting income, or making errors on tax forms. These unpaid taxes don’t just disappear; they linger and can cause significant financial and legal problems if left unaddressed.
You can owe back taxes to the federal government (IRS), your state government, or in some cases to a local municipality. That said, we find that by far the most significant tax debt problems relate to unpaid IRS taxes.
Ignoring your IRS tax debt isn’t a good option. The government has the authority to take legal action to collect the owed taxes, which may include penalties, interest, and even asset seizure. It’s essential to understand the gravity of back taxes and take proactive steps to address them.
Common Reasons for Accruing Tax Debt:
Understanding why back taxes accumulate is crucial to addressing the issue effectively. At our office, we’ve seen back taxes accrue due to various reasons:
- Failure to File Returns
Sometimes, life gets hectic, and filing tax returns slips through the cracks. However, failing to file can lead to back taxes and additional penalties. It’s essential to prioritize filing your tax returns to avoid this situation. - Underreporting Income
Whether intentional or unintentional, underreporting income on tax returns can result in back taxes. It’s crucial to accurately report all income to avoid discrepancies and potential legal consequences. - Errors on Tax Forms
Filling out tax forms incorrectly can lead to errors that result in back taxes. If the IRS corrects an error on your return, that might mean the amount of tax liability has changed from what you originally thought. We’ve seen clients struggle with this issue, which is why we emphasize the importance of double-checking forms and seeking professional assistance if needed. - Not Paying the Tax Owed
In some cases the filing piece is correct but a taxpayer simply may not pay the full amount owed on time. As such, this triggers a tax debt with the IRS. Typically individuals who do not pay the full amount owed are more likely to be independent contractors or self-employed individuals who do not have taxes withheld from their W2 paycheck. Other common instances are when a capital gain is realized (such as through the sale of stock, property or a business) and no estimated tax is paid.
Consequences of Ignoring Your Tax Debt:
Ignoring your tax debt can have severe consequences that extend beyond financial penalties. It’s essential to understand the potential ramifications:
- Penalties and Interest: The longer back taxes go unpaid, the more penalties and interest accrue, increasing the overall amount owed. These additional charges can quickly escalate the original tax debt, making it even more challenging to resolve.
- IRS Collection Actions: The IRS has various methods to collect back taxes, including wage garnishment, bank levies, and property liens. These actions can have a significant impact on your financial stability and overall well-being, making it crucial to address back taxes promptly.
- Legal Consequences: Ignoring back taxes can lead to legal repercussions, including civil penalties, fines, or even criminal charges in severe cases. It’s essential to take back taxes seriously and address them with the appropriate legal guidance to mitigate potential legal risks.
Here’s how we can help you resolve your problems with back taxes…
At the Law Office of Steven N. Klitzner, we understand that facing a significant tax debt can be a daunting and stressful experience. That’s why we’re dedicated to helping you handle the complexities of back taxes and finding a resolution that works for you.
1. Communicate with the IRS on your behalf.
When you enlist our help, you gain the peace of mind that comes with knowing we will handle all communications with the IRS on your behalf. From the moment we take on your case, we become the primary point of contact, so that you no longer have to deal with the stress and uncertainty of direct communication with the IRS. This allows you to focus on your life while our team navigates the complexities of your tax situation.
2. File outstanding returns.
A crucial step in resolving back tax issues is making sure that all outstanding tax returns are filed accurately and promptly. We recognize that filing overdue returns can feel overwhelming, but it’s an important part of the process. Our experienced team will assist you in completing and filing any overdue returns so that they are submitted accurately and in compliance with IRS requirements.
By taking this proactive step, you demonstrate your good faith to the IRS and lay the groundwork for resolving your tax debt issues. It is also an opportunity to correct any errors, inaccuracies or lack of valid deductions in the substitute return that the IRS may file on your behalf.
3. Potentially reduce the amount owed through tax debt negotiation.
We understand the importance of minimizing your tax liability whenever possible. Our team will thoroughly review your tax situation, correcting any errors and claiming any valid, missed deductions that could reduce your overall debt.
Additionally, we will engage in tax debt negotiation with the IRS to lower the total amount you owe. This can involve reducing penalties and interest or negotiating a settlement through an Offer in Compromise that could allow you to settle your debt for less than the full amount owed.
4. Negotiate payment terms.
If paying your tax debt in full isn’t feasible, we can negotiate a payment plan that fits your financial situation. Whether it’s setting up an installment agreement to spread out your payments over time or exploring other options, we’ll work to secure the most manageable terms for you. Our goal is to ease your financial burden while ensuring you remain in good standing with the IRS.
With our assistance, you can regain control of your finances and move forward with confidence towards a brighter financial future.
Don’t wait until it’s too late—contact us today at (305) 564-9199 to take the first step towards a brighter financial future.
