You aren’t alone if you’ve racked up an intimidating amount of back taxes. Maybe you forgot to file tax returns in past years or just didn’t have enough money at the time to pay your tax bill. Whatever the reason, remember that the IRS wants you to pay your back taxes and has resources to facilitate payment that don’t require hiring expensive accountants or lawyers. If you follow some tips, you’ll be on your way to fixing your IRS tax problems.
File Past-Year Returns
The first thing you need to do is get all those prior-year tax returns filed. Just because you haven’t filed tax returns doesn’t mean you can avoid accruing late-filing and late-payment penalties and interest. The IRS won’t be able to assist you unless it receives your missing tax returns. After you file all tax returns, the IRS will calculate your outstanding back taxes, which will be more than the amounts computed on your returns because of the interest and penalties. If you logon to the IRS website, you can obtain all of the old tax forms and instructions for the prior years.
Notice of Tax Due
Give it a few weeks and wait for the IRS to send you a tax bill. You can’t out a resolution until you know the precise amount of tax debt you’re dealing with. If you don’t hear from the IRS, contact their local office and request a Notice of Tax Due. This notice will outline everything you need to know about your back taxes.
Paying IRS Back Taxes
Come up with a monthly tax payment that you can manage. You can then request an installment agreement, which allows you to repay your past-due taxes on a monthly basis over a number of years. To make a payment request by mail, you can file Form 9465. But if you qualify, you may be able to propose a payment plan for your back taxes online at irs.gov. Either way, the agency will let you know within 30 days whether your installment plan was accepted or not. Keep in mind that if you ever miss a payment, the IRS has the authority to initiate more severe collections procedures, such as placing tax liens on your personal property or garnishing your wages.
Reduce W-4 Allowances
Consider reducing your withholding allowances on a W-4 form. If you are employed, the law requires that your employer withhold income tax from each of your paychecks. When the IRS allows you to pay off your back taxes in installments, you are agreeing to comply with all income tax laws for the duration of the agreement. By submitting a new W-4 and reducing the allowances, which increases the amount of tax your employer will withhold, you can reduce the chance that you’ll fall behind on your tax payments again, which is a violation of your agreement.
IRS Reference: Receiving a Bill From the IRS