How to File Back Taxes

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How to File Back Taxes

Except for death and taxes, nothing is guaranteed. That old saying is ascribed to Benjamin Franklin, who stated it in a letter to French scholar Jean-Baptiste Le Roy in 1789 concerning the adoption of the Constitution. And he wasn’t exaggerating.

Anyone earning a particular amount of money is required to submit an annual tax return. Depending on your age and filing status, the minimum varies from $5 to $27,800. Even individuals who do not meet these requirements must file, particularly if they expect a tax refund.

However, failing to file your taxes on time or failing to pay your tax obligation in full may have major implications. The Internal Revenue Service (IRS) advises submitting past-due tax returns as soon as possible to avoid fines and interest.

Key Takeaways

  • Failure to meet a tax filing deadline or to pay your taxes might have significant implications.
  • Back-taxpayers should submit a past-due return as soon as feasible.
  • You may get copies of your tax transcripts to assist you in preparing any overdue taxes.
  • Back taxes are subject to interest and penalties, and taxpayers who fail to pay may face harsh collection procedures.
  • Taxpayers who are unable to pay their past taxes may seek a payment plan or make an offer in compromise to the IRS.

What Are Back Taxes?

Back taxes are unpaid federal or state tax liabilities from a previous year. Federal income tax returns are normally due on April 15 of each year for the previous year. You may obtain a tax extension, which provides you an extra six months to submit your return. Even if your extension is granted, you must still pay your tax payment by the due date. For most individual tax payers, this is usually on April 15.

How to File Back Taxes

You must submit a past-due return with the IRS if you owe back taxes. Although the procedure is comparable to completing a tax return on time, there are a few points to remember.

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To begin, find your tax paperwork and other financial data. The same information is required for a past-due tax return as for a normal tax return. Check to see whether you have any W-2s or 1099s from the year your unpaid taxes were due. You should also obtain any receipts required for claiming income tax deductions or credits.

Whether you don’t have all of your documentation or aren’t sure if you have, you may ask the IRS for a tax return transcript. You have the option of receiving your transcript online or via mail. Transcripts are typically only accessible for the current tax year and the previous three tax years; however, taxpayers may request a transcript from an earlier tax year by filing Form 4506-T.

Because of legislative changes, tax forms are often changed. When submitting back taxes, utilize the original tax forms and instructions for the year in question. On its website, the IRS has a database of prior-year forms.

A past-due return, unlike a typical tax return, cannot be e-filed. You must ship your late return and payment to the postal address stated on Form 1040 or, if you got one, on an IRS late notice. Include any taxes payable from previous tax years with your payment. Until your outstanding payment is paid in full, it will continue to accumulate interest.

You may utilize tax preparation software or hire an expert to assist you complete your overdue return.

What Happens If I Don’t File Back Taxes?

If you owe taxes, you should submit a past-due tax return as soon as possible. If you don’t file or pay your taxes on time, the IRS will start charging penalties on the amount you owe. The following are examples of penalties:

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  • Failure-to-File Penalty: If you miss your filing date and do not file an extension, the IRS assesses a penalty of 5% of your unpaid taxes. The IRS will continue to assess an extra 5% monthly fee for up to five months. Returns submitted more than 60 days after their due date are subject to an extra late-filing penalty. If your return was due in 2021, your penalty is the entire amount of your unpaid tax debt, or $435, whichever is less.
  • Failure-to-Pay Penalty: If you fail to pay your taxes by the deadline, the IRS will assess a 0.5% penalty for each month your payment is late. The highest penalty for failing to pay is 25%. However, keep in mind that interest will accumulate until your tax debt is paid in full.

In addition, there is a penalty for failing to pay anticipated taxes, which are normally due on April 15, June 15, September 15, and January 15. The penalty for late payments is 3% in the first quarter of 2022.

Other problems, in addition to interest and penalties, might arise from failing to file and pay your taxes. As an example:

  • Past-due taxpayers will not get refunds from the IRS.
  • You could have difficulty obtaining a mortgage, government financial assistance, or other loans.
  • Self-employment income will not be credited toward Social Security benefits.
  • The IRS may submit a replacement return on your behalf, which may or may not contain all of the credits and deductions for which you are eligible.
  • The IRS may initiate collection efforts, which may involve a levy on your bank account or paycheck, as well as a federal tax lien on your property.
  • Additional enforcement fines or criminal charges may be imposed on you.
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The Taxpayer Relief Initiative used new collection techniques to assist taxpayers who owed past taxes and were facing financial difficulty as a result of the COVID-19 outbreak.

What If I Can’t Afford to Pay Back Taxes?

The IRS provides many choices to people who are unable to pay their tax due. If you owe unpaid taxes, however, you must contact the IRS for help. If you do nothing, the IRS will keep charging you interest on your unpaid taxes.

Individuals who are unable to pay their taxes have the following options:

  • Request to delay collections
  • Propose an offer in compromise
  • Request reasonable-cause help.
  • Apply for penalty reduction.
  • Request an installment contract.

In rare circumstances, professional assistance may be required in producing an offer in compromise or other remedy for your overdue tax bill. Avoid tax settlement companies that promise to provide a simple way to lower your burden. These businesses sometimes demand exorbitant fees and make unachievable claims.

Taxpayers in this scenario should seek the advice of a knowledgeable tax attorney, who can assess their case and provide recommendations. The goal is to get assistance as soon as possible in order to avoid penalties and interest costs. Ideally, you should do this before receiving a notification from the IRS. The IRS maintains a list of authorized federal tax preparers, which includes lawyers. It also provides Low-Income Taxpayer Clinics to assist those in this predicament.

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