In our experience Americans who end up with back taxes issues are not bad people or even scofflaws. The reality is that bad things happen all the time to good people who’ve done nothing to deserve them. Health issues, job loss, divorce and bad investments all contribute to this crisis.
Bad Things Happen To Good People Without Reason
In general most Americans want to pay the taxes they’re legally required to, its just sometimes they can’t pay. If you ever endured personal or financial hardships in the past or are currently experiencing them, you’re likely familiar how bad debts arise. For the uninitiated – or those who’ve only recently found themselves facing this situation; back taxes are what you owe the IRS if you don’t fully pay off your tax debt.
Unfortunately for many people already facing difficulties in life, dealing with the IRS which is a cold and uncaring government entity can be intimidating and frustrating to an already overburdened individual. So rather than resolve their issues up-front, which is the cheapest and simplest approach, they put off resolving the issue for years, further compounding the problem.
How Am I Going to Pay My Back Taxes?
If due to various life events you’ve ended up with tax debt, you’re probably wondering how quickly you can get out of this situation. Owing unpaid taxes can lead to serious legal consequences. But there are very usefull tools provided by the IRS that you can use early on to prevent everything from spiraling out of control.
IRS Offers Several Ways For People With Tax Debt To Settle
Payment Plans: People with insufficient funds to pay tax bills this year, can apply for a payment plan with the IRS. This won’t always shield you from late payment penalties but it will give you some breathing room to pay.
Installment Agreements: Are longer-term payment plans typically meant for large debts and can last as long as six years.
Offer in Compromise: The IRS knows it can’t get blood out of a stone, so provides this tool which is an agreement you make with the IRS to settle your debt for a lesser amount (Willie Nelson was charged a back debt of $16.7 million in 1990 and eventually worked out a deal that cut his tab to $9 million.) Read our blog post on how we determine who qualifies.
The Cost Of Doing Nothing
If your back taxes go back a few years you will eventually begin begin to see aggressive collections actions. That’s why it’s best to be transparent with the IRS as soon as possible but, and this is VERY important, have a professional like a Tax Attorney or Enrolled Agent help you work out a plan to pay off your debt first.
Will I Go to Jail for Owing Back Taxes?
As we explained elsewhere, probably not. If there’s a silver lining to owing back taxes, it’s that you’re unlikely to end up in jail as long as you’re being transparent with the IRS. The three commonly prosecuted tax crimes are tax fraud, tax evasion, and failure to file. The first two are felonies that can land you multiple years of prison time and hundreds of thousands of dollars in fines.
You can be charged with tax fraud if you file a return with false information about what you earned or overstating deductible expenses. Tax evasion typically involves deceit and concealment of facts and assets to claim deductions or less earned income than in reality. Intentionally failing to file a return is a misdemeanor, but facing up to a year in jail, $25,000 in fines, the tax debt you owe plus additional IRS penalties is nothing to sneeze at.
As long as you aren’t doing anything illegal to avoid incurring more tax debt, merely owing debt to the IRS over a long period of time won’t mean you’ll eventually pay with your freedom.The IRS tend to look favorably on tax payers who come forward to admit they made a mistake and, as ruthless as they are sometimes, generally won’t prosecute people just because you don’t have the money.
Will I Owe Back Taxes Forever?
Some people inevitable worry about perpetually owing taxes. Fortunately Congress has instituted a stopwatch on the tax collector through the statute of limitations. If you have an very large tax debt that would take you the rest of your life to pay off you might be able to use this as an exit ramp because there is a limit to how long the IRS is allowed to collect on it. The statute of limitations for collecting unpaid taxes only goes back 10 years. That means if you’re unable to pay off your tax debt for a decade, the IRS will likely stop hounding you for collections (but do note that the IRS has no time limit if you never file a return or file fraudulently).
Running out the statute of limitations, however, is a bad tax strategy because the IRS can upend your life and make it as miserable as possible until your debt’s paid off or the statute of limitations runs out.
What Will the IRS Do to Me If I Owe Tax Debt?
People don’t hate dealing with the IRS without reason. If you owe back taxes, you’ll likely be sent legal notices in the mail, calls from private debt collectors contracted by the IRS, and even visits from IRS agents trying to collect on your debt.
The IRS Can Also Use Oppressive Tactics
Investigation: During an audit the IRS has powers to contact your family, friends and even your neighbors to collect information on your tax affairs.
Garnishment: The IRS will collect your back taxes by taking a portion of your income directly from your employer.
Tax Liens: If the IRS puts a tax lien on your house, accounts or vehicles, they are locking up the asset with a claim that will not immediately be executed but will prevent you from selling it until the tax debt is settled.
Tax Levy: Is the final step of forcibly taking your home, car, boat, or other personal property to settle your back taxes.
The IRS can take almost everything you own from aggressive collection actions, which is why trying to run out the clock on the statute of limitations isn’t a good strategy.
What Can I Do Right Now about My Back Taxes?
Use the form below or call us on 609-630-8285 to schedule a free consultation with an Enrolled Agent who will be able to help you settle your back taxes.
