IRS & Back Taxes Resolution

Last updated on August 27, 2015

The IRS sends notices for the payment of back taxes with details about the amount of taxes owed and the various options of payment. The taxpayer then has the choice to either to resolve their tax debt or challenge the IRS’ claim. The IRS has been known to make a mistake when determining the amount of taxes owed, however this is a rare occasion.

In 1999, the IRS charged Michael Jackson’s estate $505 million in back taxes and $196.9 million in penalties. The tax filing of the estate in 2009 said that the total value of the estate was $7 million. The Jackson estate challenged the IRS’ claims and went to court.

The IRS currently states that the Jackson estate owes $702 million in back taxes, including interest and penalties. The estate claims that the IRS over-estimated its value. The legal battle continues.

The IRS notifies taxpayers of their back taxes through various notices. In case the receiver ignores the notice or does not resolve the liability, the IRS uses different collection methods, such as a levy to get back the maximum amount it can in taxes owed. The collection methods can upset the financial condition of a taxpayer and damage the ability to take credit in future.

In cases where the taxpayer believes the IRS did not correctly determine the back taxes, s/he may report the inaccuracy to the IRS. If the IRS audits and finds that the amount of back taxes to be incorrect, it will correct its mistake. However, if the IRS audits the taxpayer and finds the back taxes amount to be accurate, the taxpayer can either resolve the tax debt or challenge the claims of the IRS in court.