Can’t or Unable to Pay Back Taxes Owed
What to Do and Expect with Unpaid Back TaxesFacts About Unpaid Taxes
Having unpaid back taxes and not being able to pay is a very common thing to the IRS. In an average year, 19% of the people in the United States have back taxes. Since this is such a common problem, you can be assured there are many solutions. The IRS (as well as many states) will work with you so it can ensure that it gets paid. Typically the IRS will try to collect the maximum amount of taxes owed from you with the least amount of effort, and this is a good thing to keep in mind if you intend on settling your back taxes for less than the actual amount owed. The earlier you acknowledge the problem with back taxes and take action, the easier it will be to settle them with the IRS. If back taxes go unpaid you can be assured that the IRS will find you and will eventually take action. The IRS has a very automated process that it goes through routinely in order to make people pay. See below to find a very brief description of the events you can expect to happen if action is not taken to resolve unpaid back taxes.
IRS Actions For Unpaid Back Taxes
A tax levy is the actual seizing of assets that you own. This can be just about any asset that you own with a few exceptions. The IRS will continue to seize your assets until your tax liability is completely paid off or until you have arranged another agreement with them. Depending on what they are seizing, a levy can be called many different names.
Different types of tax levies:
What if I Owe State Taxes and Can’t Pay Them?
Just like the IRS, many states take similar collection actions against individuals and businesses and they also allow for similar resolution methods. Each state has their own rules and resolution methods to various tax problems. Refer to our state tax relief guides to resolving issues with state taxes.
That is the typical process that the IRS (and some states) takes against all individuals with unpaid back taxes. The sooner action is taken, the less money you will likely end up paying. See the column on the right for the different solutions for dealing with unpaid back taxes if you cannot pay taxes in full.
Back Tax Solutions If You Cannot Pay
Failure to Pay Tax Penalty (Penalty for not paying on time)
If you do not pay taxes when due you will be hit with this penalty. The penalty for not paying taxes or underpaying taxes ranges from 1/4% to 1% . Understand what rate you will be charged and if you can remove the penalties.
Offer In Compromise Tax Settlement Method
If you can’t pay taxes in full and don’t think you would ever be able to pay them back, this method could be good for you. This method allows you to settle taxes owed for less than the total amount.
Tax Repayment Plans
If you cannot pay taxes in full and IRS payment plan is typically the easiest method to use to get back into compliance with the IRS. Payment plans allow you to pay in monthly increments at a manageable payment amount.
Currently Not Collectible
If you prove to the IRS that you do not have the means to pay your back taxes with your current financial standing they will put a temporary hold on collections.
Delay IRS Collections
If you just need more time to pay it is possible to delay the automated IRS collection system to buy yourself a bit more time.
How to Guide on Resolving Delinquent Taxes
Understand how to go about filing delinquent tax returns and what actions you can take on your end to minimize potential tax penalties.
IRS Underpayment Penalty and Interest Rates
With unpaid taxes you are typically hit with tax penalties and interest. Understand what IRS interest rates are for failing to pay or pay in full and what you can do to lessen penalties.