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6 Steps to filing your Back Taxes

Posted on: 10th Apr, 2007 04:15 am
Back taxes are the taxes that you haven't paid off when they were due. Taxes owed to the Internal Revenue Service due to underpayment may also be referred as Back taxes.

It may so happen that you are not able to catch up with the tax payments and start avoiding it. Well, the best way is to pay down the taxes as and when it is financially possible for you. Here's a rundown of the 6 steps that will help you take control of your back taxes.
  • Collect all tax documents:
    You should have a copy of the tax return for the last year you filed taxes. Besides, you should have your W-2 forms and other tax documents for the total number of years for which you owe taxes. In case, you cannot find any such document, request the IRS for a copy of the same.

  • Prepare your tax returns:
    You may file the tax returns yourself and for that, you need a reliable user-friendly software program. However, it is better that you take the help of a tax professional having good experience in filing back taxes. The tax professional will be the right person to help you negotiate with the IRS and guide in preparing the tax returns. Until and unless your tax returns are prepared, you are not sure as to whether you will get a tax refund.

  • Be aware of limitations on your tax refund:
    There are certain time limits within which you should file your back taxes so that you can get refunds. Similarly there are time restrictions for any tax audit and tax debt collections. You should try to find out how much of the tax can be applied to payments towards other tax debts.

  • Know how to deal with the IRS:
    You should be able to avoid an IRS investigation, an assessment or levy or a lien placed by the IRS. Take help of the tax professional in protecting yourself from the IRS. Simultaneously develop a plan on how to pay down your tax debts. You may either choose a monthly payment plan in agreement with the IRS or pay down the debt in a single check.

  • Plan for next year's refund:
    Think about planning ahead for the future tax refunds. Review your overall tax situation and consider any tax payments of the past which you still owe while thinking about the next year's filing. Consult a tax advisor and try to use strategies that helps to reduce you next year's taxes and help you make proper plans for the tax savings.
Some 15 years ago while I was working as a waitress I received a notice from the internal revenue service. It said that I owe $500 in tax on tip income which I haven't disclosed to the IRS. I wrote them back that I couldn't afford to give the money then but would send it back to them as early as possible. The IRS did not disturb me any more and one reason may be because I have changed my residence twice. I haven't till now sent them the $500 but I have always been regular on taxes since the past 10 years in my married name. What is bothering me is that I have recently bought a home with my husband and I fear that the IRS may try to take away the home if they need the back taxes along with penalties and interest. What should I do? pls advice
Posted on: 13th Apr, 2007 11:33 pm
Hello Agnes,

As per the rules, if a taxpayer owes money to the IRS, it should collect it within a period of 10 years. If it hasn't asked you for the money in the past 15 years then don't you worry. Perhaps it hasn't tried hard to get the money it owes. So, the fact that you have changed your address twice does not matter.

You mention that you have been paying taxes in your married name, but more important is a change in the Social security number. The IRS could have easily traced you by your SSN. But the fact that it hasn't suggests that it actually did not want that hard to demand the back tax from you. So, be rest assured, it won't ask for the back tax anymore and even if it does, it will not seize your home.
Posted on: 13th Apr, 2007 11:46 pm
Hi Agnes,

Welcome to our forums.

I think there may be a possibility that the IRS can obtain the money it owes through refunds. You may not have noticed and it is quite obvious if the refund is a large sum in total.

However, I personally feel the IRS records regarding your tax payment is clear or else it would have created problems when your lender had checked your credit report. Still if you wish to checked your tax payment record, call up the IRS at (800) 829-1040 and ask them if there are any outstanding taxes. As a taxpayer you have the legal right to check the record. And, if you find the record as clear, do not worry any more.

However, if the IRS asks for a reason and you explain it to them, they may ask you for the money owed along with penalty and interest and that could be a large amount. But you can manage to pay it off in installments and in any case, the IRS will not seize your home.

Hope I could help you.

Good luck!!
Posted on: 14th Apr, 2007 03:48 am
There are certain tax laws which one should be aware of prior to filing back taxes. Here's a round up of the laws.
  1. If you haven't filed a tax return, the IRS may make an educated guess as to how much taxes you owe. This is known as Proposed Assessment. The IRS sends a letter – Notice of Proposed Assessment to the taxpayer so that the latter finally files a return. The IRS can in no way determine your property tax situation until and unless you file a return. So, once you file your return, the assessments can be minimized or eliminated.

  2. You may look towards getting a refund from the IRS but remember that there are specified time frames within which you can claim the refund. You can get the refund only if you claim it within 3 years of filing the return.

  3. The IRS can impose penalty and interest charges on the back taxes which you haven't yet paid. In general, there are 3 penalties – failure to file penalty, failure to pay penalty and finally the interest. If you are in a financial crunch and wish to avoid paying penalty, it is better that you file an extension. By doing this, you will be able to reduce the failure to file penalty.
Posted on: 23rd Apr, 2007 11:47 pm
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