Many taxpayers avoid filing their tax returns, because they fear owing the IRS a large tax debt. However, just because you haven't filed your return doesn't mean that you won't wind up with a Federal tax bill. In fact, if the IRS sees that you didn't file for years you were required to, they will file a Substitute for Return. This page will explain how you get IRS back tax debts and what to do about them.
How Substitutes for Return Create IRS Back Tax DebtsIt takes a little time to wind up with IRS back tax debts. This may sound like a good thing, but it rarely is. It usually takes about two years for a Substitute for Return to be processed for an unfiled year. The IRS will file you either as Single or Married Filing Separately, depending on your last filing status. You will be awarded no tax credits or deductions whatsoever. You will also be taxed at the highest possible tax bracket.
After your IRS back tax debt is assessed, the IRS adds on penalties and interest. At this point, you will have reached the 25% maximum Failure to File Penalty. This will be added onto your tax debt. Half a percent will be added for every day you do not pay your tax debt in full as a Failure to Pay Penalty. Then, interest will be added for every day your tax debt goes unpaid. The interest rate can change every three months. It has been as low as 3% and as high as 16%.
By the time you find out about your IRS back tax debt, it is far higher than it would have been originally. In addition to this, you may have a far worse financial situation than you did when you neglected to file your tax return. IRS back tax debts are usually dramatically worse than tax debts acquired from your own filed tax returns.
How to Take Care of IRS Back Tax Debts from Substitutes for ReturnFortunately, the IRS is more than willing to replace Substitutes for Return for your own personally prepared tax returns. You can locate the appropriate tax forms on the IRS website, but you will not be able to e-file your IRS back tax returns. You will need to mail them to the appropriate IRS address, which you can also find on their website.
Doing this will significantly reduce your IRS back tax debt, but it will not eliminate it. There are many options to handle your IRS back tax debts. The following list contains just a sampling of the possibilities.
If you can get enough money together to pay your IRS back tax debt in full, that is the option you should choose. It will save you a great deal of money, and is the only certain way to keep levies and liens from happening.
If you have more than $10,000 in IRS back tax debt, consult a professional. Call now or fill out the form below for a free tax debt consultation to take control of your IRS back taxes! We'll only connect you with a tax debt relief company holding at least a B rating with the Better Business Bureau.