It could get worse than simply not getting an income tax refund. For instance, you could wind up owing penalties and interest, increasing your total tax obligation.

Back-tax collection activities can have serious consequences, including garnishing Social Security benefits. Meanwhile, the IRS itself may file a substitute return for you, and if they do, they’re not trying to find your maximum refund. There’s a fine line between delinquent tax returns and unfiled tax returns. One thing is for certain, it’s not a tax situation you want to leave for another year.

Back taxes happen. Maybe you forgot to push the submit button on your tax software or simply had a busy year. There are also penalty relief options: penalty abatement, payment plans, even offers in compromise.

File your taxes. Pick a payment plan. Follow your plan. It’s a simple, direct process for handling unpaid income taxes, but one that comes with plenty of flexibility and options for low-income taxpayers, including tax relief programs and installment plans.

Before worrying about how you will pay off your overdue taxes, it’s critical that you file your current tax returns.

Whatever your financial situation, the IRS wants you to be upfront with them. The penalties for not filing your tax returns, or late filing, are often more severe than the late payment penalty. Whether or not you can actually pay your delinquent taxes now, your first step in resolving back taxes should be filing any late returns. Grab your tax software, or better yet, contact a tax preparation pro at Community Tax to help you get started.

Filing back taxes follows the same steps as a normal tax year:

1. Gather tax documents, such as Forms W-2s and 1099s, and prior-year returns. If you need information from a previous tax year, the IRS can help if you fill out a Form 4506-T. You may want to contact your financial institutions, old employers, etc., to request any W-2 forms if you don’t have them.
   • If you still don’t have all the information you need, you can also ask for a tax transcript from the IRS. It’ll include income transcripts from what your employer had filed in those years.
   • If you need to report self-employment income, do all your research to make sure you’re accurately reflecting your income level before turning in those 1099 forms.
2. Start filling out a Form 1040 for the specific year you owe. The 1040 individual income tax return forms are available on the IRS website. If it’s been a while since you’ve done your federal returns, contact a qualified Community Tax preparer to get started. Pay close attention if you’re doing your own taxes, either by paper or with tax preparation software, because if you can legitimately take advantage of tax deductions to reduce your taxable income, do so, and make sure your paperwork is thorough. That includes calculating penalties for missing deadlines for estimated taxes if you were self-employed those years.
3. Submit the returns to the Internal Revenue Service. You may consider using an electronic filing or e-file submission to curtail late payments and interest charges. That also puts any federal refunds or credits owed on a fast track to you.

Once you’ve filed your income tax return, you can start thinking about how to pay your taxes owed.

The IRS offers various installment payment plans that can help taxpayers who may not be able to pay the full amount they owe on a delinquent tax return.

Issuing an immediate response to your back tax situation is important, despite what you can or can’t pay. Yes, a lump sum initial payment is a good idea to pay off as much of your tax balance as you can, and then you can begin to explore IRS payment plan options, such as an installment agreement or an Offer in Compromise. If your monthly income is low enough or unstable, you can even request a delay in collection on your back taxes.

Let’s take a look at each of these back tax payment plans in more detail.

This is a monthly payment plan that allows you to pay a rate to the government over an extended period of time, usually anywhere from 4-6 years.

If you owe $50,000 or less, you can apply for an online payment agreement.

If you owe $50,001 or more, then you’ll have to make the request by filing Form 9465 and then proceed with a Collection Information Statement as well. You’ll need these tax forms:

• Form 433-A
• Form 433-B
• Form 433-F

Regardless of how much you owe, you and the IRS will be negotiating on taxes owed. If they agree to lower the amount you owe, there is a possibility you could make partial installment payments. There are no guarantees, but the IRS wants to ensure every taxpayer makes a reasonable effort to pay their taxes owed. In the right case, that could include a partial installment payment plan.

This is a settlement offer that you and your tax professional make to the IRS that is less than the taxes owed. This is how it works: you pay the agreed-upon amount and the IRS will then forgive the remaining balance. This type of payment alternative can be tricky because the taxpayer has to meet a specific criterion that proves they’re eligible. For instance, if the taxpayer is eligible for a payment arrangement, then they will not be eligible for Offer in Compromise. This sort of payment plan option is specifically for those experiencing extraordinary financial hardship. However, if the taxpayer, usually assisted by a professional tax representative, can declare and prove that they’re eligible, then the Offer in Compromise can be incredibly beneficial.

Applying for an Offer in Compromise

1. Complete IRS Form 656 and 433-A.
2. Include relevant documentation: Paystubs, investment statements, bank statements, and other financial documents listed on each of the forms mentioned above. Be sure these are copies, not originals.
3. Include the $205 fee with your application (low-wage earners may request a waiver). The IRS accepts personal checks.
4. Mail your application, documents, and fee to the IRS. The appropriate address can be found in this IRS handbook.

This option is not a payment plan, but it’s more of a diversion of the immediate amount due. In this case, the IRS labels your account ‘not collectible’ and will then wait for your financial situation to improve. Here are a few things to keep in mind if you do apply for non-collectible status:

• Be sure to file Form 433-F.
• By no means does non-collectible status reduce the amount of the taxes owed—and in most cases, your balance will accrue interest while the status is in effect. However, this delay in the collection process may still be a type of relief if unforeseeable circumstances have arisen, like a natural disaster situation.
• The IRS will continue to check in to see whether your finances have improved enough to begin collection efforts.

Once you’ve secured a repayment plan with the IRS, it’s critical that you meet your expected payments until your taxes owed have been paid off. Not meeting payment requirements could cause problems and additional taxes owed later on down the road. There are always options when dealing with taxes owed. It’s important that if you’re going to tackle the problem on your own, you do an ample amount of research and understand exactly what repayment option suits your situation best. However, for these types of issues, it’s strongly recommended that you consult a tax professional and ensure that everything is done correctly.

It is possible that the IRS will levy the assets of a taxpayer who has repeatedly failed to make payments. Federal tax levies can take many forms that can affect your credit score, income and even your ability to qualify for property loans.

Individuals who do not fulfil their back tax obligations may be subjected to the following penalties:

If the government imposes wage garnishment on your income, your employer will be legally required to withhold a certain percentage of your paycheck to cover unpaid taxes. This is the easiest of the punishments the government can enforce when there’s failure to pay taxes. These tend to be steeper percentages, taking more out of your month in wage income than if you had a payment plan option. They can even garnish your Social Security benefits, so make sure you pay close attention if you have outstanding taxes due.

If a tax lien is enforced, the government has claimed your property as an assurance of rights to your property over other creditors waiting for tax payments. These liens also appear on your credit report. That means if you lose your property to the government, it will go towards your taxes, and you’ll still owe money to creditors.

Tax officials will demand that your financial institution puts a hold on the funds in your bank accounts and seize said funds to cover your unpaid tax liability. Bank levies are not instant. The government has 21 days before they can legally withdraw the money from your account to cover your overdue balance.

Property owners face a particular consequence for severe behavior: All of your property assets are up for grabs if you have repeatedly avoided repaying your taxes. Authorities may seize items such as your home, car, boat, or any other asset that might be sold to cover your taxes owed. Again, when this occurs, the funds derived from the sale of your property(s) help to clear your taxes owed, but they do not contribute to the individual loans owed for any of the given properties seized. That means you may be paying on mortgage payments for a property that the IRS seized to settle your unpaid taxes.

It’s possible to avoid all these consequences by meeting the original tax return deadline for each tax year. That said, some circumstances can be unavoidable. That’s where the trusted expertise of Community Tax can help. It is essential that you speak with a tax professional as quickly as possible to formulate a payment plan that will work for your individual needs. Our team understands how to connect your business loans and medical expenses to the IRS forms to explain the full situation and pursue the minimum penalty for you.

Back taxes are not something to be taken lightly and can often prove to be quite complicated. In order to ensure that you do not run into further trouble or continue to accrue interest on your outstanding tax balance, the right steps need to be handled carefully, quickly, and professionally.

With the many options available to get back taxes help, choosing the correct path to tax resolution can be difficult. Community Tax provides full-service tax help and employs experienced tax practitioners who are able to analyze your particular circumstances, identify the source of the tax balances, and develop a plan to most efficiently resolve your back tax problems including filing back taxes. Community Tax is proud to offer free consultations, so you can get to know us before committing to a back tax resolution plan.

Find the back tax help that best fits you as soon as possible and don’t risk falling any further into back taxes owed, by calling Community Tax today at (800) 444-0622.