So, you owe taxes to the past. What comes next? The Internal Revenue Service won’t come to your door or your bank account the day after your taxes are due. However, if you wait long enough, the IRS will come to collect unpaid taxes.
The way the IRS collects back taxes depends on factors such as how much money you owe, how far behind you are on your payments, and what steps you take to make things right with the agency.
when you owe back taxes to the IRS, what does it do?
When you file your income tax return annually, you are telling the IRS how much you owe in taxes. The IRS expects you to pay your tax bill when you file your tax return. If you don’t pay or can’t pay, your payment is late and is called “back taxes.”
You may also have to pay back taxes if you still need to file your tax return. When you don’t send in a tax return, the IRS guesses how much you owe and sends you a bill. Most of the time, this tax bill from the IRS is higher than what you probably owe. This is because it only looks at your income, not any deductions or credits you might be eligible for. But you have back taxes that need to be taken care of, whether you tell the IRS what you owe or they tell you.
The IRS will pay your back taxes if you don’t. The IRS usually does one of three things when you haven’t paid your taxes.
establish a federal tax lien
A lien is a claim or hold on something. The federal government can put a federal tax lien on your property if they haven’t gotten their money. When you try to sell that property, you will be able to do so once the government either removes the lien (after getting paid) or allows the sale with the condition that any profits go straight to paying your tax bill.
charge you a fee for your property
A lien puts a hold on your property, while a levy takes it away. If the IRS decides to take your property, they will send you a Notice of Levy, or CP504, telling you that they plan to seize it, sell it, and use the money from the sale to pay off your tax debt. In short, the IRS takes the money you owe right out of your pocket.
Most of the time, the IRS seizes your personal property, like your car, boat, or house. With wage garnishment, the IRS can take your wages, your retirement income, your Social Security income, or the money in your bank account.
taking something off a federal tax return
If you owe back taxes from previous years but expect a tax return this year, you may be disappointed. They won’t send you theirs if you have yet to send the IRS their money. A common way for the IRS to get back money owed from the past is to take it out of your current or future tax refunds.
when does the act of collecting begin?
If your taxes were due on Monday, you should know that the IRS will only put a lien on your house or take money out of your bank accounts on Tuesday. There is a way to let the IRS know, and you have many chances to pay off your tax debt before they start trying to collect it. Taking care of missing tax returns and paying back taxes will be less stressful than waiting for the IRS to take action against you.
If you missed the deadline to file your taxes or got overwhelmed by the process, you could work with accounting professionals and enrolled agents at Countick to clean up your books, file your late tax returns, and figure out your back taxes. You will have to pay less in taxes, and you will have to pay less in fees. You won’t have to give the IRS control of your money. Instead, you’ll stay in charge of your own money.
But if you miss the deadline and don’t do anything about it, the IRS will think your taxes are late the day after the deadline. Fees will add up, and the IRS will send you letters to tell you that you owe taxes and to tell you what they plan to do next to get their money.
Because every business is different and every situation is different, there is no standard time frame for collecting. You will be given a chance to pay any taxes you forgot to pay and figure out your late tax bill on your own before the government takes steps beyond late filing and payment of fees to punish you.
how long can the IRS try to get back taxes?
In most common back taxes, there is a 10-year limit on when the government can try to get the money back. Federal law says the IRS has ten years after the deadline for filing taxes for each year to collect what is owed. For example, if you didn’t pay your taxes in 2020, the IRS has until 2030 to get what’s owed. The Collection Statute Expiration Date, or CSED, is the date after ten years when you can no longer try to get money from someone.
if you can’t pay the taxes you owe, what will happen?
The IRS wants you to pay your taxes. This is the most important thing to remember. It’s in the agency’s best interest to make it easy for you to pay your taxes late, so the IRS has made several programs to help you pay your back taxes before they go to collections. The IRS’s “Fresh Start” program gives taxpayers many ways to get help to pay their tax bills. There are options in the program to:
- Set up a payment plan or installment agreement with the IRS to pay your tax bill in monthly installments.
- You can pay less of the taxes you owe through an Offer in Compromise if you can’t pay because of financial hardship. You’ll have to prove this, and not many people are eligible.
- Use a “currently non-collectible” agreement to put off paying your taxes until you can do so more efficiently.
It can be stressful when you miss a tax deadline and need to know what to expect from the IRS about late payments. If you need to catch up on your taxes, the best thing you can do is take steps to get back on track.
- Let Countick help you get your books in order so you can file any tax returns you forgot to send in and stay on top of your taxes in the future. We even have tax experts who can help you figure out the best ways to get tax relief so you can clean up your books for good.
