Back Taxes Owed to IRS FAQs
Generally, the IRS is permitted by law to assess penalties for failure to pay taxes. “Back taxes”- defined as taxes not paid by the original filing due date- are subject to interest and a monthly late payment penalty. You can pay back taxes, or taxes owed, by paying the full or by setting up a payment plan with the IRS.
The IRS offers several payment options including
• Electronic payments
• Direct payments from your bank account, or credit and debit card payments.
• You can pay online or through the IRS2Go app available on the Google Play Store, the Apple App Store, or the Amazon Appstore. You can also pay by phone or online.
• If you do not have a bank account, you can pay with cash, by mail, or in person at an IRS office
Yes. If you owe back taxes, the IRS will keep your tax refund and apply it to your tax bill until it is paid in full. This applies even if you are on a payment plan. The tax refund is generally applied to the oldest year with the tax due balance.
10 years after the date of the assessment, subject to certain exceptions.
Possibly. An “offer in compromise” allows you to settle your debt with the IRS for less than the amount you owe.
Generally, yes. Ten years after the date of assessment, a statute of limitations called the “collection statute expiration date” requires the IRS to stop collection actions subject to certain exceptions.
It depends. To enter into an offer in compromise with a debtor, the IRS considers
(1) your future ability to pay
(2) your income
(3) your expenses
(4) your asset equity.
The IRS will approve an offer in compromise when the amount offered represents the most the IRS can expect to collect within a reasonable period of time.
The IRS Fresh Start program was created in 2011 to help struggling taxpayers and small businesses. The program was created to aid taxpayers struggling to pay their taxes with flexible Offer in Compromise terms.
It depends. If you enter into a payment plan agreement with the IRS to pay back taxes, your payment amount will be determined by the amount you owe, the time frame of the payment plans, interest, and penalties.
It is possible in certain cases to receive waiver of penalties. You may qualify for relief from penalties if you attempt to comply with IRS requirements but are unable to meet your financial obligation due to circumstances beyond your control.
Penalties eligible for waiver may include:
• Penalties for failure to file a tax return
• failure to pay on time
• failure to deposit taxes as required
If your penalties are reduced, the IRS will automatically reduce the interest owed. However, it should be noted that the IRS generally does not abate interest charges for reasonable cause or as first-time relief. Note: You can also apply to a streamlined payment plan or a partial payment plan. Some payment plan approvals may require the taxpayer to submit financials.