Filing late back taxes can be compared to the snowball effect; gradually growing and increasing over time before becoming destructive.  Unfortunately, so many individuals tend to overlook the consequences in unfiled back taxes along with the power of the IRS when making their tax filing decisions. Once one is late on filing back taxes, it becomes very easy to fall into the cycle of taking no action; however, taking the simple and proper measures to remedy the situation can save a lot of money, time, and stress.

Filing your late back taxes: The Process:

1. Gather the proper documents. These documents include:
   • Old W-2 forms from employer(s) (or form 4852 in their place)
   • 1099 Tax Documents
   • Bank statements
2. Find and prepare missed tax forms
   • Visit the IRS webpage or a local tax resolution firm to find the tax return form (1040 Form)
   • Separate each year’s documents with their corresponding tax form (you need one per every year missed)
   • Claim all deductions, exemptions, and credits (this will help in reducing your liabilities)
3. Seek assistance
   • If the process feels overwhelming, which is very well may be, do not hesitate to find help
   • There are numerous tax services that will make the process simple and easy for you. Tax professionals will guarantee a thorough and accurate job, while also working to solidify the best return for you.
   • Tax professionals can also significantly help with lowering your balance, by securing more deductions, reducing penalties, or working with the IRS to create a payment plan
4. Sign and complete your forms
   • Be sure to review your forms and information
   • Locate the sending address of your notice
   • Address the envelope and send the forms to your local IRS office with the payments included
   • If you cannot pay in full, pay as much as you can
   • If you cannot pay at all, it is important to still send the file
5. Work with your tax professional
   • Once you have sent in your returns, continue to work with your professional in settling the amount owed and filing your next return

Sill avoiding filing your late back taxes?  Let’s take a look at what the IRS can do to you.

1. First, penalties and interest will increasingly begin to grow on the amount owed
2. Next, The IRS may complete a “Substitute for Return,” which combines all missed years into one tax return, and therefore eliminates all chances of federal exemptions or expenses being taken from the amount
3. After that, the IRS will find you, eventually, no questions asked
4. When the IRS does find you, they will begin to take collections
5. Finally, the IRS may place a tax levy on your bank accounts, or even a federal tax lien on your personal property

Needless to say, it is a good idea to file your late back taxes as soon as you can. Realizing the consequences of waiting any longer, follow the aforementioned steps and begin the process now.

Related posts:

1. File Late Tax Returns to Take Control of Your Back Taxes
2. How to Handle Filing IRS Back Taxes
3. When to File a Late Tax Return or Request a Tax Extension

An IRS installment agreement allows you to set up a monthly payment plan to pay back the tax money you owe. In order to qualify, you generally need to be in good standings with the IRS. If you owe less than $10,000 and have a clean record you should most likely automatically qualify, as long as you can pay the balance over a 36 month time period. If you owe more than $10,000 but less than $25,000 you should also qualify if you are in good standings. You will then have up to 60 months to pay back the amount due. Special agreements are also often made for those that owe $25,000 by calling the IRS.

If you owe $25,000 or less you can apply right on line at the IRS website or print off the application form and send it in. There is an application fee of around $100.00 which is cut in half if you set up to have your payments automatically withdrawn from your bank account. You can also pay by credit card or with a check or money order. When you get your confirmation that your application was accepted, it will tell you where to send your amount due each month.

If you do decide to apply for an IRS installment agreement, you should know that the IRS can file a notice of federal tax lien on your property in order to secure their investment with you. They can keep the lien on your property until your final payment has been made. They IRS considers a tax lien a passive way to collect what they are due. By placing the lien you have a vested interest in getting the lien removed and will be more likely to make your tax payments.

A tax lien is very serious and should not be taken lightly. It can reap havoc on your credit score, dropping it as much as 200 points or more. A tax lien also stays on your credit for seven years after your final payment. Not everyone will receive a tax lien, but anyone the IRS feels is a risky investment could receive one.

If the IRS decides that they are going to issue a tax lien against your property as part of your installment agreement, they will send you what is called a 2603C letter. This letter will let you know that your agreement has been accepted with the condition of the tax lien. In the letter they must state the date that they will be filing the tax lien. They are required to give you at least a 10 day notice. If you pay off your tax bill before the date given, they cannot file the lien.

If you do receive one of these letters and can scrounge up the money to pay your bill it is in your best interest to do so. If they do place the lien you need to realize that while it is there you will not be able to sell your home and most likely not be able to get any type of credit. This includes opening a new credit card, receiving funding for a car loan, taking out a mortgage or renting an apartment. Your insurance could also go up as many insurance companies now use your credit score to help determine your rate. Some employers even look at credit scores before hiring.

If you do end up getting a lien placed on your property you will want to do all you can to pay off your tax bill quickly. As soon as it is paid off you will want to have the lien removed. Usually the IRS automatically does this within thirty days of your last payment, but you will want to pay close attention and make sure that they do so.

Related posts:

1. Importance of Paying Your Installment Agreement On Time
2. Why an IRS Installment Agreement Will Cost You More
3. Tax Installment Agreement: What You Need to Know

Once the IRS gets wind of the fact that you failed to pay your taxes the their collection process starts. The IRS collection process is a very automated process and it is starts with being subtle about what is owed and will continue to get harsher and harsher until your taxes have been paid or enough assets have been seized to fulfill the outstanding tax liability. This collection process is very similar for most individuals but it can deviate course a bit depending upon your assets, financial situation, and past run ins with the IRS. Below are the standard steps the IRS collection system will follow.

1. Receive Series of Tax Assessment Letters: These letters will start off by simply stating what you owe in taxes and that you must pay. Each letter following the original will get a bit harsher in tone and a bit more threatening each time. Each time an IRS letter goes ignored you can expect the IRS to increase the severity of their next letter or action. Typically you will receive about 4 different letters that assess tax amounts owed before any actual action is taken by the IRS. These threatening letters will last for a period of 4-6 months before the IRS moves to their next collection tactic.
2. Receive an Notice of Federal Tax Lien: A tax lien gives the IRS legal claim to your assets in order to secure payment. This should not be taken lightly because it is very unlikely you will be able to get any company to lend you money since the IRS has first dibs on proceeds from your assets over other creditors. Many people do ignore the tax lien because it may not effect their everyday life, but if you continue to ignore it you can be assured the IRS will move to a harsher collection mechanism. (Sometimes this step can be skipped and the IRS moves right to #3 if they are dealing with a lot of money or think they are dealing with a very unresponsive taxpayer)
3. Receive notice of intent to levy: A tax levy is the final collection mechanism used by the IRS where they will forcefully seize your assets against your will. Once they issue a tax levy they have already labeled you as an unresponsive taxpayer and take collections into their own hands since you have failed to work with them to pay back the taxes. The IRS has several levy methods they use and they will choose the one that is easiest for them to collect taxes. The three forms of levy they will use are the following:
   • Wage Levy: They will contact your employer and require that they withhold amounts from your paycheck in order to pay down the tax liability.
   • Bank Levy: The IRS will contact your bank and require that they freeze funds in their in order for them to seize what funds are in there to satisfy the tax liability.
   • Asset Seizure: The IRS will seize assets of yours and sell them in order to satisfy the outstanding tax liability.

As you can see the IRS will not stop until they get what is owed to them. Hiding from the IRS and trying to prevent them from getting the taxes owed is extremely difficult. If you cannot pay your taxes it is a good idea to work with the IRS and pay back the taxes you owe on your terms instead of on their terms.

Related posts:

1. Tax Services: Use a Large, Nationwide Firm or Small Local Firm?
2. Federal Tax Levy: Steps to Resolution with the IRS
3. Importance of Paying Your Installment Agreement On Time

The break down of what is owed:
2004: $4,392
2005: $5,933
Total: $10,325

For those that don’t know who Brooke Shields is, she is an actress and model that is known for her roles in Pretty Baby, The Blue Lagoon, Suddenly Susan, That 70′s Show, Hannah Montana and many others. She had many problems in 2005 which could have been the cause of her failure to report all income or pay her taxes properly. In 2005 Shields publicized her battle with postpartum depression with the recent child birth and the death of her father 3 weeks later.

Celebrities seem to be a huge target for the IRS lately. It is either the celebrities are having a harder time paying their taxes or it is just proof that the IRS is stepping up collection actions in order to collect more taxes. The IRS did hire more agents this year which is giving them the ability to catch more individuals than ever with tax problems.

Related posts:

1. Oakland Mayor Ron Dellums Owes $239K in IRS Back Taxes
2. Flavor Flav Owes $183K+ in Back Taxes
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Sinbad has had several tax liens placed on his assets for taxes he has owed since 1998. The IRS wants to begin to levy Sinbad’s assets but it seems he is doing a good job at keeping assets out of his name in order to prevent this. One example is a $1.5 million home in California that is registered under his brother’s name, but all payments made towards the home are made by Sinbad’s company or his own personal checks.

Look for more updates on this actor because there seems to be some fishy situations going on here and owing this much in federal back taxes will not be overlooked or taken lightly. The IRS is known for making examples out of famous people in order to scare others into paying their taxes. This possibly could be one of those cases.

Sinbad Stand-up Comedy

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Around the end of March, a trial will be held on the matter according to the Crow Creek’s Tribal Farm, as the tribal attorneys filed a notice of “lis pendens” which means that the sale cannot be finalized until the lawsuit is completed.Typically, Federally recognized tribes are typically not subject to taxes,  and this is what the US Bureau of Indian Affairs told them. The Fort Laramie Treaty is supposed to prevent the tribe from being taxed.  But for corporations affiliated with certain tribes (corp formed as separate entity from tribe), the laws are hazy. Brandon Sazue stated that tribal accounts have experienced tax levies up to the day this sale was completed. In order to get the land back they 180 days to pay 20% more than the buyer paid.

Here is another example of the IRS yet again using its might to recover back taxes. Many companies and individuals out there have foreign accounts or have unpaid taxes that is in their best interests to pay now as Federal tax revenues decline exacerbated by weakened economy and high unemployment.

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It makes you wonder if all these people are really having financial troubles or is the IRS just getting too complex causing problems for many people. In 2007 Big Boi and Andre “3000″ ranked 13 in Forbes Hip-Hop Cash Kings list and they are said to have made $14 million that year. It is hard to believe that he doesn’t have enough to pay his taxes or even pay a financial adviser to enough to make sure he stays in compliance with IRS laws.

OutKast Ms. Jackson Grammys Live

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Flavor Flav is known for yelling “yeah boy” and “Flavor FLAV” during on stage performances of his rap group. He also stands because he always wears a clock around his neck.

Flav has also been a part of several reality shows, including Flavor of Love, The Surreal Life and Strange Love.

This is not the first Rap Star or celebrity to fall into trouble with back taxes. Recently, Method Man and Nas were reported to owe back taxes as well. This seems to be an on going problem with many famous people who have been failing to pay their taxes.

Public Enemy Music Video

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Oakland Mayor, Ron Dellums, owes the IRS $239,000 for taxes he failed to pay in 2005, 2006 and 2007, according to public records and confirmed by news reports. A public tax lien was placed on his residence.  Here is yet another politician who, like Charlie Rangel, has been caught with tax problems.

The San Francisco Chronicle broke down Dellum’s unpaid taxes and IRS tax liabilities by year:

• $124,198 in unpaid taxes from 2005
• $66,554 in unpaid taxes from 2006
• $48,246 in unpaid taxes from 2007

Dellums has stated that he is committed to resolving these tax problems or unpaid taxes.  As a taxpayer, the IRS does not care who you are, or what you do, with declining tax revenues it is in your best interest to pay taxes owed now rather than later because tax interest and penalties will only add to your balance.

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NAS, who real birth name is, Nasir bin Olu Dara Jones, was hit with a $2.5 million dollar tax for unpaid taxes between 2006-2007. According to the IRS, who filed a tax lien against the rapper, he did not pay taxes for 2006 and 2007.

This recent rapper joins the ranks of Method Man, who was recently reported to be in trouble with taxing authorities.

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