What to Do If You have a Tax Debt

Last updated on April 17, 2023

If you were required to file taxes for 2013, but for some reason, you could not pay before the April 15^th filing deadline, you are under tax debt. Owing taxes to the IRS after the filing deadline attracts penalty and interest. Even if you have filed for an extension and not paid an estimate of the taxes you owe, you are still charged penalty for non-payment and interest on the taxes due.

Tax Debt & Intentional Failure to File

Along with charging penalties and interest on back taxes, the IRS also requires from taxpayers the reason for the failure to file and/or pay. In cases where a tax return has been filed, but the entire amount of taxes have not been paid, the IRS may initiate an audit and/or impose a heavy penalty for the understatement of taxes. The IRS is particularly aggressive when there is an intentional understatement of taxes.

If you fail to file a tax return and the IRS believes that it was intentionally done to evade taxes, the IRS may charge a penalty of up to $100,000 for corporations and $25,000 for individual taxpayers. In certain cases, especially of tax evasion, a year of imprisonment along with the penalty can be ordered.

If you could not file and pay your taxes due to an event that was beyond your control such as a natural disaster, death in the family, divorce, etc. you may get a waiver on penalties. It is advisable to contact a tax professional to achieve penalty abatement and resolve the tax debt.

Tax Debt Resolution

If you owe back taxes, first you need to figure whether you can pay the entire tax debt amount in a lump sum or not. If you can, you simply need to pay the full amount, including penalty and interest, to the IRS. If you cannot pay the full amount in a single payment, then you will need to apply and qualify for a tax debt payment plan.

According to the varying financial capabilities of taxpayers, the IRS has many tax debt payment plans such as Installment Agreements, Currrently Not Collectible and Offer in Compromise. There are also facilities that allow forgiveness or reduction in penalties. Therefore, to achieve a resolution that provides you the most benefits, explore all IRS rules that can help you to reduce your tax debt or pay it comfortably.

Help for Tax Debt Resoution

Before hiring a tax resolution service, conduct research to confirm that the service is authentic and competent. You may use trustworthy online resources for your research such as the website of Better Business Bureau, the Federal Trade Commission, etc. Our ratings and reviews of some of the top tax resolution services may help you in your research.