Owing back taxes is no fun. If not addressed, back taxes are subject to onerous penalties and compound interest. Over time, especially if multiple years of taxes remain unpaid, back taxes can destroy financial security for families, result in business closures and even lead to bankruptcy.
It’s important to note that tax problems can be solved with planning and consulting a tax expert.
In addition, the IRS may take aggressive enforcement action, including wage garnishment, bank account levies and asset seizures. To prevent a tax problem from snowballing into a crisis, it’s important to take steps that protect yourself from the IRS.
Solutions to resolving IRS delinquent taxes
Often, those who owe back taxes simply don’t file a return for the year(s) in question. If I am unable to afford the taxes, many people reason, why file a return? This is the opposite of what delinquent taxpayers need to do to protect their interests. The IRS considers failure to file a tax return (when required) a violation of criminal law; failure to pay after filing a return is strictly a civil matter.
In addition, the IRS may opt to file a Substitute for Return (SFR). An SFR is a substitute for your unfiled tax return prepared by the IRS. The substitutes are prepared in the government’s favor. This means you are given the standard deduction and one dependent only. Also, other tax deductions you are entitled to are not included, such as business expenses. This often leads to thousands of dollars in increased taxes, upon which additional interest and penalties are calculated.
Filing back tax returns is the first step toward resolving tax problems. As long as the returns remain unfiled, it is impossible to bring taxes current and get the IRS off your back permanently. In addition, the returns must be filed to qualify for any tax relief programs offered by the IRS. These programs often reduce penalties and interest. In some cases, part of the taxes owed may also be forgiven. Usually, taxpayers can qualify for installment payments that make the tax bill affordable.
If the IRS has filed an SFR, it is even more imperative that you file a tax return for any year covered by an SFR. The tax return you file, which will include all eligible deductions, is almost guaranteed to result in a lower tax bill. Once filed, your return replaces an SFR.
Preparing past due tax returns
To file a past due return, first gather all needed documentation, such as W-2’s, 1099’s, earned interest statements, etc. Make sure to calculate all expenses and deductions to which you are entitled, as well as include exemptions on the tax return.
Consult a tax expert before filing
Consulting a tax expert saves taxpayers with IRS debt thousands of dollars and more. Complex IRS tax codes often lead to missing deductions and filing errors. When compound interest and penalties are added to these errors, the taxpayer can owe many times the original amount. A tax expert can ensure your tax debt is reduced as much as possible.
A tax expert also has experience negotiating with the IRS. As with most government bureaucracies, the IRS has procedures that must be followed. It also has specific requirements for taxpayers to qualify for tax relief and payment plans. Qualifying for these programs are essential to many taxpayers because they cannot afford the entire tax bill at one time. Without eligibility for these programs, they would be subject to bank levies, wage garnishments and other harsh collection actions. A tax relief professional understands these programs and which ones suit his or her clients’ best, resulting in prompt approval of tax settlements that end your tax problems.
Will tax problems go away on their own?
Tax problems never go away on their own, even if the IRS has not sent any communications regarding unpaid taxes or unfiled returns. The IRS often takes years to contact taxpayers about delinquent taxes. Meanwhile, interest and penalties accrue. The federal tax record keeping system is linked to Social Security and all state computer systems. If you owe money, the IRS will eventually locate you and initiate collection procedures.
Owing the IRS can turn into a nightmare scenario. Astronomical interest and penalties can quickly bury taxpayers in hopeless debt. Thankfully, there are tax relief programs that cut tax debt down to size, making it possible to put an end to tax problems. By working with a tax professional, a delinquent taxpayer can cut what they owe and become eligible for an installment plan that makes repaying back taxes possible.
If you are experiencing serious tax debt, you should take immediate action to resolve your tax problem. The Law Offices of Peter C. Rageas can help. Our tax law firm Detroit, Michigan has been helping clients throughout the Tri County area and beyond for over 20 years. Protect yourself and know your rights! Contact us today for a case evaluation.
