A Breakdown on How to Eliminate Back Taxes
Back taxes unpaid taxes from previous years not paid on time. They are a result of failures in reporting all sources of income or miscalculate the appropriate deductions to be paid or deliberately decide to not pay the tax due to financial straits.
How to Solve the Problem
Upon discovery of the owed back taxes, two options are open to you. You could consider contacting a tax attorney or file the back taxes yourself.
An advantage of the first option is that: you would have an experienced professional representing your interests and keeping the tax force at bay while you resolve the issue.
The only downside to it is the fee you will have to pay the attorney for his/her services. With the second option, you will not have to pay anyone to do anything on your behalf, but you will face the rigors of the process by yourself.
There is a way to strike a balance between these two options; you could take advantage of back taxes relief service providers online. It is less cost-intensive and will provide a step-by-step guide through the process of resolving the issue.
How Does Repayment Work?
With the proper advice, planning, and re-strategizing, it is quite easy to find enough resources to pay off back taxes. Where you are unable to pay off the entire debt, it is most likely that you would have to file an amended return and pay a portion of the accrued tax.
First, you have to reach an agreement with the appropriate tax authority on how and what amended tax return they are willing to accept.
The next step will be for you to figure out how you want to pay the tax. Since most tax authorities (like IRS) accept both check and credit cards, the payment options available to you are quite flexible.
Where, due to financial restraints, you are unable to pay off the taxes at a go, an arrangement can be reached with the tax authority to pay the debt off in installments. To successfully do this, you may have to reorganize your finances and expenditure. You may also have to liquidate your assets by selling off some possessions to aid in paying off the debt.
The consequence of Failure to Pay Back Taxes
Taxation authorities have available to them a host of legal sanctions to employ to force defaulters to pay back taxes owed them. Some of these sanctions include:
- The imposition of hefty charges and interest on owed taxes monthly;
- Filing of tax lien against defaulter (this move could affect the defaulter’s credit long after the debt’s cleared);
- Seizure of assets; and
- Prosecution for criminal tax evasion, which entails imprisonment upon the conviction of the defaulter.
The Way Forward
Upon completion of payments, endeavor to avoid owing back taxes in the first place. Where it occurs, or despite your best effort, employ the services of an accountant, take steps to improve your finances, and have savings account somewhere that would come in handy in times like these.