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If you receive a notice from the IRS that you owe back taxes, don't panic. The IRS may actually owe you money, especially if the reason for the IRS notice is that you didn't file a tax return for the year in question. Very often people who fail to file a tax return have actually overpaid their taxes.
But be aware that if you have failed to file a tax return or have underpaid your taxes, you might be liable for penalties and interest, which are included in the IRS's claim. And interest is not just charged on your back taxes, but on the penalties against you for owing back taxes, as well.
What to Do First
If the IRS informs you that you owe back taxes, the first thing you must do is to fill out and file the tax forms for the year(s) the IRS claims you did not pay or underpaid your taxes. Voluntarily filing your tax return as soon as possible is extremely important to help erase the possibility of being subject to criminal charges. It is also essential because before you can begin to deal with the IRS or negotiate a potential resolution to their claim that you owe back taxes, you must have filed your return.
Be certain that all of the income reported on all of your W-2 and 1099 returns were included on the tax return for the year the IRS claims you owe back taxes.
Possible Consequences
If you filed your tax return on time, and reported all of your taxable income, but did not pay the amount the IRS says that you owe, you may only be subject to a penalty for failure to pay. But you must resolve the situation in order to halt the collection action from the IRS.
If you owe back taxes amounting to less than $10,000, and are not in a financial position to immediately pay your back taxes in full, the IRS may agree to set you up on a repayment plan. If your financial circumstances are such that you are unable to pay anything at the present, you may be able to get the IRS to put a temporary hold on their collection actions until your financial situation improves enough to allow you to repay what you owe.
Note: Many people prepare their own tax returns. But in a situation where the IRS has notified you that you owe back taxes, you may very well want the security of choosing a reputable, experienced tax professional or company to properly and accurately guide you through the resolution process with the IRS.
But be aware that if you have failed to file a tax return or have underpaid your taxes, you might be liable for penalties and interest, which are included in the IRS's claim. And interest is not just charged on your back taxes, but on the penalties against you for owing back taxes, as well.
What to Do First
If the IRS informs you that you owe back taxes, the first thing you must do is to fill out and file the tax forms for the year(s) the IRS claims you did not pay or underpaid your taxes. Voluntarily filing your tax return as soon as possible is extremely important to help erase the possibility of being subject to criminal charges. It is also essential because before you can begin to deal with the IRS or negotiate a potential resolution to their claim that you owe back taxes, you must have filed your return.
Be certain that all of the income reported on all of your W-2 and 1099 returns were included on the tax return for the year the IRS claims you owe back taxes.
Possible Consequences
If you filed your tax return on time, and reported all of your taxable income, but did not pay the amount the IRS says that you owe, you may only be subject to a penalty for failure to pay. But you must resolve the situation in order to halt the collection action from the IRS.
If you owe back taxes amounting to less than $10,000, and are not in a financial position to immediately pay your back taxes in full, the IRS may agree to set you up on a repayment plan. If your financial circumstances are such that you are unable to pay anything at the present, you may be able to get the IRS to put a temporary hold on their collection actions until your financial situation improves enough to allow you to repay what you owe.
Note: Many people prepare their own tax returns. But in a situation where the IRS has notified you that you owe back taxes, you may very well want the security of choosing a reputable, experienced tax professional or company to properly and accurately guide you through the resolution process with the IRS.
