Back taxes are taxes not completely paid when they are due. They can be assessed by either the federal, state or local government and are almost always subject to steep fines and fees. The government usually has ten years from the date the tax was assessed to collect. You could be assessed back taxes for one of three reasons:
1. By filing a return, but not completely paying your taxes by April 15
This is the most common reason for back taxes. Most of the time, people who owe back taxes file their tax return, but fail to pay their taxes by the deadline for one reason or another. If this happened to you, you would be assessed a “failure to pay” penalty in addition to the original tax.
2. By failing to report all of your income
In this case, you could have filed and even paid your tax return. However, you will still be assessed back taxes if you do not report income. Be sure to always report all of your income, because the IRS gets copies of your W-2 forms, and they know how much you made. If they notice a discrepancy between the records they already have and what you report, they will send you a Proposed Tax Change Notice. You have a certain amount of time to challenge the proposed change, and then you will have to pay taxes on the new amount, plus fines.
3. By neglecting to file a tax return all together
If you do not file a tax return all together, the IRS will file one for you. Because the IRS gets copies of W-2s from employers, they can keep track of those who do not file returns. The return filed by the IRS will usually give you the fewest tax deductions and credits possible. If you do not pay taxes on the replacement return, you will then be assessed back taxes.
Fines and fees from back taxes can add up quickly. If you are assessed back taxes, take care of them as quickly as possible. Contact us today to find out how the experts at Omni Financial can help you quickly settle your back taxes.