If you ever endured financial hardship, or are currently experiencing it, you’re likely familiar with what back taxes are. For the uninitiated – or those who’ve recently found themselves facing this situation – back taxes are what you owe the IRS if you don’t fully pay off your tax debt.
No one particularly enjoys dealing with the IRS, and least of all are those with unpaid tax debts. Dealing with this seemingly cold and uncaring government agency can be intimidating and frustrating. That’s why people often turn to a tax attorney to help them resolve issues with their back taxes.
At Damiens Law Firm, PLLC, we help our clients deal with a myriad of tax problems. When clients owe back taxes, however, we often get five common questions.
How am I going to pay my back taxes?
If you owe unpaid taxes, you’re probably wondering how quickly you can get out of this situation. Owing unpaid taxes can lead to serious financial consequences, but luckily there are steps you can take early on to prevent everything from spiraling out of control.
The IRS offers a few ways for people with tax debt to pay it off:
- Payment Plans: If you don’t have enough cash on-hand to pay your tax bill this year, you can apply for a payment plan with the IRS, although this won’t shield you from late payment penalties.
- Installment Agreements: These are longer-term payment plans typically meant for large debts and can last as long as six years.
- Offer in Compromise: This is an agreement you make with the IRS to settle your debt for a lesser amount. These are uncommonly granted by the IRS, but a skilled tax attorney can help you increase your odds of success.
These, of course, are what you can do to resolve your tax liability on terms agreeable to you. If your back taxes last for longer than a few months, you may begin to see aggressive collections efforts come into play. That’s why it’s honest to be upfront with the IRS as soon as possible and have an attorney help you work out a plan to pay off your debt.
Can I go to jail for owing back taxes?
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 honest 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.
Will I owe back taxes forever?
If you have an overwhelmingly large tax debt that would take you the rest of your life to pay off, fortunately there’s a limit to how long the IRS is willing 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.
Running out the statute of limitations, however, shouldn’t be part of your tax plan. Why? 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 liability?
People don’t hate dealing with the IRS for no reason. If you owe back taxes, you’ll likely be bombarded by 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 take more direct action, such as:
- Tax Liens: When the IRS puts a tax lien on your house or vehicles, they are laying claim to them. While property with a tax lien will not be immediately taken, you are prevented from selling it.
- Tax Levy: This more aggressive collection action involves the IRS forcibly taking your home, car, boat, or other personal property as payment for your back taxes.
- Wage Garnishment: The IRS will also try to collect your back taxes by claiming part of your income directly from your employer.
You may lose 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 plan.
What can I do right now about my back taxes?
If you have outstanding tax debt and no way to pay it off, reach out to a tax attorney for help as soon as possible. There may be options on the table to resolve your tax debt that you were never aware of that can make your life easier.
At Damiens Law Firm, PLLC, we work with clients experiencing the frustration of feeling sunken by owing a public and private debt. If you need help with your tax debt, we can support you through this matter and work every possible angle to help you find relief.