What Are Back Taxes?
- August 24, 2019
- Posted by: asal
- Category: Tax Resolution
If you have a big bill from the IRS, you might ask yourself, “What are back taxes?” The idea behind back taxes is pretty self-explanatory. If you can’t pay all of your taxes for a year, you will owe back taxes. While the concept of back taxes seems simple, dealing with back taxes can be difficult. The longer you wait to pay, the harder settling back taxes can be. If you owe the IRS money in back taxes, call the experts at Platinum Tax Defenders. The Platinum Tax Defenders team has years of experience in settling back taxes for clients. Read on for more information on back taxes.
What Are Back Taxes And How Long Does The IRS Have To Collect?
Typically, the IRS has ten years to collect back taxes. Once ten years pass, the statute of limitations prevents any collection actions. The statute of limitation starts running from the date the IRS assesses the tax. If you didn’t pay taxes in 2011, the IRS would likely evaluate the taxes due in 2012. Therefore, the IRS can collect on your account until 2022. During the statute of limitations period, the IRS can employ several collections activities. The IRS can:
– Garnish a taxpayer’s wages
– Place a levy on a taxpayer’s bank accounts
– Claim a tax lien on a taxpayer’s personal property
Additionally, the IRS will impose penalty fees for failing to pay back taxes. When you owe the IRS money, settling back taxes is your best bet. Settling back taxes can help you reduce total interest and penalties that you owe the IRS. What are back taxes and what if I don’t pay? Read on to find out what happens.
What Are Back Taxes And What If I Don’t Pay?
There are severe consequences for not settling your back taxes. The IRS can charge you five percent interest for each month that you’re late. Penalty fees max out at 25 percent. Additionally, the IRS will continue to charge interest on your back taxes if you don’t pay. It’s b fest to work on settling your back taxes before they get out of hand. The experts at Platinum Tax Defenders have been helping clients solve back taxes for years. Whether you owe back taxes or current taxes, the penalties and interest the IRS charges accrue overtime. The failure-to-file penalty starts at 0.5 percent of your balance due per month and caps out at 25 percent. Additionally, the interest rate for underpayment of taxes is currently six percent. However, the interest rate percentage changes quarterly.
What Are Back Taxes And What Should I Do If I Owe The IRS?
Before dealing with the IRS, it’s imperative to understand your options. The experts at Platinum Tax Defenders can walk you through your options for settling back taxes. Below are some scenarios wherein you can settle back taxes with the IRS. The best thing to do when attempting to negotiate with the IRS is to work with an experienced tax professional.
Negotiate an Installment Agreement
As a taxpayer, you can negotiate an Installment Agreement with the IRS. An Installment Agreement allows you to pay back your taxes in monthly installments. The type of Installment Agreement for which you receive approval depends on your situation. If you have the means to settle your back taxes within 120 days, an Installment Agreement is not for you.
Short-Term Extension To Pay The Full Balance
The IRS allows taxpayers up to 120 days to pay their full tax balance. A short-term extension option is useful for taxpayers who need a short time to pay their total tax bill. The IRS will charge interest at the short-term federal rate plus three percent. As a note, the interest may also fluctuate each quarter.
The IRS also offers options for people in hardship situations. Some of these options include:
For hardship extensions, taxpayers will only qualify if they can prove that paying taxes causes financial hardship.
What Are Back Taxes And Can I Get A Personal Loan?
For settling back taxes, you may want to ask a friend or family member for the money. A loan may be an inexpensive option but always use your best judgment.
What are Back taxes and Can I Pay With a Debit or Credit Card?
The IRS also permits settling back taxes with a debit or credit card. Paying with a credit card is convenient because it gives taxpayers greater control and flexibility with payments. Also, some taxpayers may earn points, miles, or other rewards with credit cards. However, higher credit card balances may negatively impact your credit score. Additionally, paying with a credit card may not be a good option for people with unmanageable credit card debt.
If your reason for not paying back taxes is valid, you can apply for penalty abatement. However, penalty abatement doesn’t reduce how much you owe. Penalty abatement minimizes the penalties applied to that debt. In this case, the IRS will either reduce or remove penalties. To receive approval, you must have “reasonable cause” not to file or pay on time. Unfortunately, not having the money to spend on time isn’t an excuse.
What Are Back Taxes? Address Them Sooner Rather Than Later
It’s not easy to get away from tax debt as a result of back taxes you owe. The IRS can garnish your wages, place levies on bank accounts, and liens on your property. It’s not an option to avoid settling back taxes. Therefore, it’s in your best interest to determine a solution as soon as possible.
Need Help Settling Back Taxes? Call Platinum Tax Defenders
If you are asking yourself, “What are back taxes?” We can help you. If you ask yourself, “What are back taxes and how do they affect my financial freedom? We can help you with that as well. Settling back taxes can be hard if you don’t have the money to settle. However, the IRS offers many opportunities for taxpayers to settle back taxes. Even if you don’t have the financial means to settle back taxes, the IRS can help. If you’re wondering, “What are back taxes?” and you want Platinum Tax Defenders’ expertise, call us today. We offer free consultations to new customers.