What Are “Back Taxes?”
Taxes are a part of life; far back into human history, people have had to pay taxes in one form or another, which hasn’t changed in the modern era. Most Bucks County-based bankruptcy law firms have helped individuals who were unable to pay their taxes on time, leaving them with back tax payments to their tax authority.
Most know that paying taxes is important, but if you find yourself unsure of whether you can pay your taxes on time, you should understand the cost involved with owing back taxes.
What Are They?
Put simply, back taxes are taxes you owe, but couldn’t pay by the deadline. These taxes could be your entire tax bill or a part of it that you didn’t have the money to cover. Any taxing authority could be owed back taxes if you failed to pay your tax bill in full at the federal, state, and local levels.
It could be that failing to pay taxes was entirely unintentional, such as forgetting about some income or neglecting to file a tax return because of life circumstances. They can, however, become a very serious issue if you fail to pay them.
Why Do They Matter?
Back taxes wouldn’t be as big an issue if it weren’t for the interest and penalties that can accrue from not paying your taxes on time. Failing to pay the first time incurs a minimum fee of at least $100, but this gets added to by the accrual of interest, typically at a starting rate of five percent of the unpaid balance, plus fees. However, the longer you don’t pay your taxes, the more interest and charges accrue to your balance, making what was once a straightforward tax bill into quite a bit of money.
Additionally, after a certain point, the tax authority will begin to issue liens and, in some cases, even seize your valuables to pay off the back taxes you owe.
What Should I Do if I Owe Back Taxes?
If you know that you won’t be able to cover your tax bill, or already owe back taxes, then there are a few different roads to potential solutions:
- Installment Payment Plans: Contact the tax authority you owe about possible payment plans for your taxes.
- Payment Extensions: Whether it’s short term or due to hardship, sometimes you can get an extension on paying your taxes.
- Offers in Compromise: If you can’t pay your federal taxes because it would mean taking on a severe financial hardship, the IRS may give you some tax relief to settle the debt for less than you owe.
Just because you weren’t able to pay your taxes on time, doesn’t mean that the problem is unsolvable. If you have questions about the back taxes you owe or want to schedule an appointment with a back tax attorney in the Philadelphia area, call Tadross Law today.