Back taxes— over 18 million Americans owed them in 2014, according to the IRS. Millions more will pay tax penalties for not paying their taxes on time.
If you’re one of these Americans, the only question you probably want to answer is how to fix your back taxes.
The good news is, you’re not alone and you don’t have to fix your tax problem alone.
As professionals offering IRS help, we’ve developed a few self-help strategies to get you back on your feet.
The worst thing you can do with back taxes is to wait to do something about them. No good tax help recommends postponing action.
Don’t assume you can avoid penalties by not filing your taxes either. The IRS can penalize you up to 5% of unpaid taxes all the way up to 25% of your unpaid tax balance.
So, avoid the added fees and interest that come with failure to pay by filing and start paying what you can.
Depending on your situation (specifically if you owe less than $50,000), you could qualify for specific payment plans.
The IRS offers multiple repayment solutions including a long-term installment plan, settlements, and delayed payments. The latter two are contingent on financial hardship, but installment plans are open to most situations although they do come with added interest.
You will have to set up the plan through the IRS, so be prepared to wait for the proper paperwork
However, don’t wait to hear back to start making payments (see strategy 1 above).
If you owe a small amount of back taxes, then an extension plan could be a good option.
The IRS offers a short-term extension which gives you 120 days to pay the tax bill in full. Of course, there are a few stipulations to the extension, but if you meet their standards and are confident you can pay your bill within 120 days, then this is a great option.
Ultimately, dealing with the IRS is far from easy. If you’re dealing with a complex or high tax bill, it’s time to find professional tax help.
We have helped many clients successfully pay their back taxes, and we can help you too. Reach out to us if you have more questions about your taxes.