You may owe the Internal Revenue Service (IRS) back taxes because you failed to pay them when they were due or under-reported your income, perhaps accidentally. Some people wait to pay their taxes because they feel that doing so will be a financial hardship for them and their families, while others foolishly think that they can even avoid paying them indefinitely.
When this happens, the IRS can demand immediate payment of the IRS back tax, including substantial fines, interest, and penalties. If you find yourself in this unfortunate position and file your back taxes quickly and correctly, you may be able to minimize the consequences, which sometimes include imprisonment. Your tax liability may be the balance due on your tax return, the assessment from an IRS audit, or an IRS proposed assessment that now has become final. At that point, the agency has 10 years to collect what is due, along with the penalties and interest that have accrued, or the statue of limitations on the collection will expire.
If you ever receive a past-due tax bill from the IRS, you may then be contacted by its Automated Collection System, a vast computer-driven network intended to aid in the tax collection process. It transmits most of the agency’s legal notices and collection letters related to the payment of delinquent taxes.
Paying IRS back taxes
Before taking any action, you should consult with a tax professional to assess the situation and work out a strategy for settling your federal income taxes. Don’t be fooled into thinking you will succeed without IRS back tax help. Along with preparing them accurately, this person will also have the expertise to negotiate with the IRS on your behalf. Note also that federal tax returns that are filed late cannot be submitted electronically.
If you are a small-business owner, as you prepare to file your income tax return, remember that you must pay a “self-employment tax” (which is actually Social Security) that amounts to 15% of your profits, and you must not neglect this obligation. Also, if you owe back taxes for any reason and fail to take action, you may find that a lien has been placed against your assets, your wages have been garnished, or your bank account has been seized. Next, be aware that taking the step of declaring bankruptcy will not be a viable solution because it doesn’t apply when it comes to owing money to the IRS. To avoid all this, you will want to set up a repayment schedule after negotiating with them. Again you should not try to deal with the IRS without IRS back taxes help.
Why negotiation can work
The IRS prefers receiving a portion of your debt to them as opposed to getting nothing while a year or more passes and the various penalties add up. Of course, if you owe back taxes, you should really have an experienced negotiator in your corner instead of trying to go through the process alone, much like a defendant who might attempt to represent himself at a jury trial. While there will be some expense involved, such as maintenance fees, an ethical negotiator will be looking out for your interests, and based on past experience, he will also know how much bargaining room actually exists. Perhaps your own bookkeeper or accountant can handle this for you, or at least be able to provide you with a referral who will help you avoid any serious legal consequences.
If this is the first time you have had to take such a step because of owing the IRS back taxes, you can be reasonably certain that you will receive a sympathetic ear with the agency as you negotiate a settlement, but that will not be the case if you end up becoming a “repeat offender.”