Back Taxes are State or Federal taxes that are outstanding from previous tax periods. These taxes usually result in some sort of penalties or interest because they are overdue, and will continue to accumulate until they are paid. In the interest of avoiding liens or forced collection actions taken against you by tax agencies, it is highly recommended that back taxes are dealt with as quickly as possible.
Back taxes go unpaid for a variety of reasons. Misinformed taxpayers may be unaware that they owe taxes or that they owe more than what they paid. Some neglect to file the correct forms, while others consciously avoid paying taxes and file no forms at all. Back taxes are applicable to both businesses and individuals, and left unattended can result in grave consequences.
Showing initiative to pay back taxes is the recommended approach, as opposed to waiting for tax agencies to come to you for payment. The I.R.S. even offers amnesty to taxpayers to demonstrate intent to pay off their back taxes, offering assistance and payment plan options to those who need them. However, without your cooperation, tax agencies will take aggressive measures.
The first step in paying off back taxes is by filling out the appropriate forms for every unpaid tax year. This will help determine how much money is owed, if at all. Sometimes, taxpayers discover that the government actually owes them money; by not filing returns, some taxpayers may end up overpaying and are eligible for refunds. More involved back taxes may require the assistance of tax professionals that are well acquainted with tax laws and are qualified to negotiate with agencies on your behalf.
A payment plan is the best option if you are unable to pay back taxes. By determining an amount to offer as payment that fits your budget, you may avoid severe legal consequences. It is important to know, however, that tax agencies may take a variety of actions to collect the funds owed, including property confiscation, placement of liens and a levy on financial accounts.