How Do You Know if You Have Back Taxes?

Do You Know if You Have Back Taxes

Do You Need to Fear the Internal Revenue Service?

You should take prompt action to develop a plan and settle the back taxes you know you have. The most critical thing a taxpayer can do to help prevent the penalties and expenses associated with an IRS letter, according to Michael Raanan, an enrolled agent and the president of Landmark Tax Group, is to respond as quickly as possible.

However, the Internal Revenue Service (IRS) is difficult to work with. Over the last several years, taxpayers have complained about an uptick in incorrect IRS correspondence, unreturned phone calls, and lengthy processing times.

The challenge is figuring out whether you have any tax obligations to the IRS. Use these tools if you need assistance understanding or paying off your tax obligation, and be sure to stick to these guidelines if the Internal Revenue Service (IRS) ever gets in touch with you.

Do I owe the IRS?

There are several methods to find out whether you have an outstanding tax debt with the IRS:

  • The IRS will contact you by mail.
  • When tax payments are overdue, the IRS sends notifications. You will never hear from the IRS by electronic communication (email, text, phone, or social media).
  • Sign in to After signing in, you'll have access to your tax records, where you may check for payments due or already made, and a breakdown of your tax bill by year.
  • Tax returns and auditing.

Be aware that if you owe back taxes, it may be calculated while filing or amending a tax return for a preceding year. In addition, for more information, taxpayers may reach the IRS by dialing 800-829-1040. You will need to contact the IRS to get information regarding your tax bill. It might be challenging to get in touch with someone during tax season.

Please pay attention to communications from the Internal Revenue Service. Tax experts recommend that you use more than one of these methods to confirm and double-check your tax liability before taking any action.

What happens if you have tax debt and don't pay it?

The Internal Revenue Service assesses late payments mainly by filing penalties and interests.

Nonpayment of taxes results in a penalty of 0.5% per month (or a fraction thereof). Fortunately, this penalty cannot exceed 25% of the total taxes you owe. It is terrible news that the late submission penalty has been raised. This rule affects any tax liability that has not been settled by the filing deadline (usually April 15).

Any tax return submitted more than one month late will incur a penalty of five percent of the tax due, up to a maximum of twenty-five percent. As soon as the tax deadline approaches, the clock starts ticking, and the penalties begin to collect if you haven't filed by that time.

More money will be required the longer you delay. A penalty of $435 or 100% of the tax you owe, whichever is greater, will be assessed if you don't file your return by the later of the original due date or the extended due date by 60 days.

If a tax bill isn't paid in full by the due date, interest accumulates on the unpaid amount on that day. It continues until you pay the invoice. Each day you fail to make a complete payment toward your obligation, interest is added to the total amount due. This is also on top of any late filing or late payment penalties.

Say you file your taxes late without requesting an extension and you owe money. Often, the penalties you may have to pay could amount to as much as 47.5% of the tax you owe. Here's how it breaks down: 25% for late payment and 22.5% for late filing.

Subsequently, submit any overdue tax returns.

If you have taxes to pay but haven't filed your returns yet, you may calculate how much you owe each year by completing the necessary paperwork. However, while doing so, you must use all of the tax forms that were available for the particular prior year for which you are paying taxes.

To file your tax return for the year 2018 in the year 2021, you will need to use the 2018 tax return forms, schedules, and instructions. The Internal Revenue Service will notify you of your error if you submit your taxes using the wrong forms. For example, those from a different tax year.

You may obtain a large number of IRS forms from prior tax years. The IRS website allows you to look for each form separately if that's more convenient. However, many of the older forms on the IRS website need printing and manual completion.

Finally, calculate interest and any applicable fees.

The Internal Revenue Service (IRS) will apply interest and penalties to your tax bill if you pay your taxes late. Therefore, if you haven't submitted your taxes in a while, you should still ensure you file as soon as possible. Remember that calculating the penalties and the interest will give you a more accurate approximation of the total amount due.

To provide just one example, if you file your tax return more than five months after the original due date, you'll have to pay an extra 25% of the tax you owe.

What is a payment plan?

A payment plan is an agreement between you and the IRS that allows you to spread out the payment of your tax debt over a longer period. Even if the deadline has been extended and you believe you will have enough time to pay your taxes in full within that window, you should still request a payment plan. You will not be charged a monthly fee if approved for a temporary payment plan. The Internal Revenue Service (IRS) will levy your assets or file a Notice of Federal Tax Lien if you fail to pay your taxes by the due date.

Know that your specific back taxes situation will influence the available payment options. You may pay in full, sign up for a shorter-than-180-day payment plan, or enter into a longer-than-180-day payment plan (installment agreement) (paying monthly).

Online applications may be available to anyone who meet the following criteria:

  1. If you have filed all your tax returns and your total tax, penalties, and interest due is less than $50,000, you may qualify for a long-term payment plan (installment agreement).
  2. Scheduled payments for the near future: You owe the government less than $100,000 combined in taxes, penalties, and interest.
  3. You have submitted all required paperwork, and your total tax, penalty, and interest liability is $25,000 or less. The option of a more extended payment schedule is open to you (installment agreement).

Trying to figure out how to settle an IRS debt, yet stuck for ideas? We may be able to provide a hand.

If you know you have back taxes but can't afford to pay them off, the professionals here can advise you on what to do. In addition, the tax professionals at have an in-depth familiarity with the IRS' protocol for handling tax debt relief. Both the IRS's techniques and qualifications requirements have the potential to get more convoluted. If you need help figuring out how to reduce your tax bill, seeing a professional is a good idea.

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