Information and some frequently asked questions about paying back taxes:
What should I do if I owe back taxes on my personal income?
The sooner you resolve the issue, the better off you will be. The IRS will charge you penalties for not filing tax returns plus you will be charged interest on the money you owe. The penalties and interest can add up quickly, and may end up adding another 25 percent to your tax debt. Generally, after a return is more than 60 days late, the IRS begins assessing a 5 percent a month penalty, which can add up very quickly.
An attorney can prepare an Offer in Compromise and present it to the IRS in an effort to reduce your overall bill and/or work out a payment plan that you can afford. The IRS may also agree to what’s called a penalty abatement, lowering or eliminating the penalties you have been charged. In most cases, the IRS will insist on an offer or payment of at least as much as what is called the Reasonable Collection Potential. This is the amount the IRS believes it could reasonably collect after calculating your assets and income, including your future income.
The U.S. Tax Code is complex, but there are ways to get relief.
If the IRS doesn’t accept the Offer in Compromise, an attorney can appeal the case to IRS Office of Appeals, which is independent of the rest of the IRS and resolves more than 100,000 cases every year. In rare cases, an appeal can be filed in the U.S. Tax Court.
What is penalty abatement?
Tax penalty abatement is when the penalties that you owe to the IRS are reduced or eliminated. This only happens after negotiating with the IRS.
What is a tax levy?
This is the method the IRS uses to seize your assets in order to pay your taxes.
What can I do if I didn’t pay trust fund taxes that my business owed on employees?
Trust fund taxes are the taxes business withhold from employee wages and pay to the federal government. These taxes go to pay for unemployment compensation, Medicare and Social Security, as well as the employees’ income taxes. They have to be paid to the federal government using Federal Tax Deposits. Essentially, the employer is only holding this money for the government.
Not sending this money to the government can cause a business serious problems and can even result in criminal penalties for the business or the business owner. The government will charge penalties and interest on the money from the moment it’s due.
But be aware, if you have failed to pay trust fund taxes, you are not alone. Your best course of action is to deal with them as soon as possible. The longer you wait, the more trouble you may have resolving the problem. An experienced tax attorney can help you negotiate a payment arrangement with the Internal Revenue Service. A payment plan can allow you to pay the taxes over a period of time instead of having to come up with the money in a lump sum. And you may be able to get the total tax debt reduced.
An attorney can prepare what’s called an Offer in Compromise, which will explain your financial situation and offer a payment arrangement.
If the IRS rejects the offer, an attorney can appeal that decision to the IRS Office of Appeals, or even the U.S. Tax Court.