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Handling back taxes - options for repayment and relief | Layton & Stacey Smith
You’re dealing with back taxes—what a headache! What can you do to get this monkey off your back? The first thing to do is to stop running from the IRS and listen to this episode of Cigars and Taxes, where we provide practical options for relief. Grab your drink and cigar and join us in the Somers Point Cigar Lounge.
What Are Back Taxes?
Back taxes are taxes that were due but weren’t paid on time. For example, if you owe taxes from 2022 and still haven’t paid them, then you owe back taxes. This can include income taxes, payroll taxes, and state taxes.
Don’t wait to address back taxes because you’ll incur interest, which will continue to grow until the taxes are paid.
Consequences of Not Paying Back Taxes
You can’t bury your head in the sand and ignore back taxes. The IRS will keep coming after you until you start paying. Some of the consequences you could face include:
Penalties
Interest
Wage garnishments or other levies
Prolonged payment schedules
Additionally, the embarrassment of owing back taxes can be harder to deal with than the other consequences and may even strain your relationship with your partner.
Addressing Your Back Taxes
Here are the steps we recommend for handling back taxes:
Review all of your IRS letters (Don’t throw them away!)
Verify the original amount you owe
Consult a tax professional (The most important step)
We also discuss repayment options:
Installment Agreement: Automatic, streamlined, and regular options are available, and we explain each in detail.
Partial Payments: Layton shares an example of a client who owed $400,000 and how a partial payment plan helped.
Offer in Compromise: This allows you to settle your debt for less than the full amount owed.
To qualify for these repayment options, you’ll need to provide the IRS with your income and expenses. Based on this information, the IRS will determine which repayment option is appropriate.
“Bankruptcy does not automatically eliminate tax liabilities. However, it can reduce the interest accrued on the owed amount.” — Layton Smith
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By Layton Smith and Stacey Hoffler SmithYou’re dealing with back taxes—what a headache! What can you do to get this monkey off your back? The first thing to do is to stop running from the IRS and listen to this episode of Cigars and Taxes, where we provide practical options for relief. Grab your drink and cigar and join us in the Somers Point Cigar Lounge.
What Are Back Taxes?
Back taxes are taxes that were due but weren’t paid on time. For example, if you owe taxes from 2022 and still haven’t paid them, then you owe back taxes. This can include income taxes, payroll taxes, and state taxes.
Don’t wait to address back taxes because you’ll incur interest, which will continue to grow until the taxes are paid.
Consequences of Not Paying Back Taxes
You can’t bury your head in the sand and ignore back taxes. The IRS will keep coming after you until you start paying. Some of the consequences you could face include:
Penalties
Interest
Wage garnishments or other levies
Prolonged payment schedules
Additionally, the embarrassment of owing back taxes can be harder to deal with than the other consequences and may even strain your relationship with your partner.
Addressing Your Back Taxes
Here are the steps we recommend for handling back taxes:
Review all of your IRS letters (Don’t throw them away!)
Verify the original amount you owe
Consult a tax professional (The most important step)
We also discuss repayment options:
Installment Agreement: Automatic, streamlined, and regular options are available, and we explain each in detail.
Partial Payments: Layton shares an example of a client who owed $400,000 and how a partial payment plan helped.
Offer in Compromise: This allows you to settle your debt for less than the full amount owed.
To qualify for these repayment options, you’ll need to provide the IRS with your income and expenses. Based on this information, the IRS will determine which repayment option is appropriate.
“Bankruptcy does not automatically eliminate tax liabilities. However, it can reduce the interest accrued on the owed amount.” — Layton Smith