How to Deal With Back Taxes From the IRS
Back taxes can be a daunting topic, especially if you owe money to the IRS. No one wants to face the possibility of penalties or even jail time, but the good news is that there are ways to deal with back taxes. This blog post will provide an overview of what back taxes are and some tips on how to handle them.
What Are Back Taxes?
Back taxes refer to any taxes that you have not paid on time. This can include federal, state, and local taxes. The IRS typically gives taxpayers a grace period of 10-21 days to pay their taxes before penalties begin accruing. However, if you do not pay your taxes within this grace period, you will owe back taxes.
The amount of back taxes you owe will depend on several factors, including the amount of money you owe, the length of time you have owed the taxes, and whether or not you have made any attempts to pay the taxes owed. Additionally, the IRS may assess interest and penalties on the amount of back taxes owed. The interest rate is currently set at 6%, and the late payment penalty is 0.5% of the unpaid tax balance per month.
How to Deal With Back Taxes
If you find yourself owing back taxes, it is important to take action as soon as possible to avoid further penalties and interest charges. The first step is to contact the IRS and explain your situation. You may be able to work out a payment plan or an offer in compromise (a settlement in which you agree to pay less than what you actually owe).
If you cannot afford to pay your back taxes in full, it is still important to pay as much as possible. Paying even a small amount towards your back taxes can reduce the amount of interest and penalties that accrue. Additionally, it shows the IRS that you are making an effort to pay what you owe, which could make them more likely to work with you in future communications.
Dealing with back taxes can be stressful, but it is important to take action as soon as possible to avoid further penalties and interest charges. If you are unable to pay your back taxes in full, contact the IRS and explain your situation. You may be able to work out a payment plan or an offer in compromise. Additionally, paying even a small amount towards your back taxes can reduce the amount of interest and penalties that accrue.
What Are Tax Liens?
A tax lien is a claim the government makes against your property when you don't pay your taxes. The lien protects the government's interest in your property and gives them the legal right to take possession of it if you don't pay your debt. Tax liens can be placed on your home, car, boat, or any other property that you own.
How a Tax Lien Is Created
When you don't pay your taxes, the government sends you a notice that says you owe them money. This notice is called a "demand for payment." If you don't pay the amount they say you owe within 10 days, the government can file a public record called a "Notice of Federal Tax Lien." This is how a tax lien is created.
The government can also file a Notice of Federal Tax Lien if you don't agree to pay your taxes after an audit. An audit is when the IRS reviews your tax return to make sure you reported all of your income and took all of the deductions and credits you're entitled to. If they find that you owe additional taxes, they'll send you a bill for the amount due plus interest and penalties. If you don't pay this bill within 10 days, they can file a Notice of Federal Tax Lien.
What Happens if I Have a Tax Lien?
Once the IRS files a Notice of Federal Tax Lien, they have a legal right to take your property to satisfy the debt. The lien also becomes public record, which can damage your credit score and make it difficult to get loans or buy property. Having a tax lien can also make it hard to get a job because potential employers may view it as financial responsibility.
If you don't pay off the debt within 10 years, the statute of limitations expires and the IRS can no longer collect on the debt. However, even though they can't collect, the lien will continue to show up on your credit report for up to 7 years after the date of assessment unless you take action to remove it.
A tax lien creates some serious financial problems for taxpayers. Not only does it give the IRS the legal right to take possession of your property if you don't pay what you owe, but it also damages your credit score and makes it difficult to borrow money or buy property. If you have a tax lien, it's important to take action immediately to resolve the issue before it causes even more financial problems down the road.