If you owe the IRS money, you may be wondering how to untangle the confusion regarding the amount of back taxes owed. While plenty of options exist for rectifying a tax issue stemming from unpaid taxes, it’s important to begin working with the IRS right away to avoid messy issues with interest, wage garnishments, tax liens, and more. Fortunately, the IRS provides some clear resources for figuring out how much you owe, getting your taxes paid, or working out a settlement. Here’s a look at what you need to know if you’re trying to pin down answers on IRS taxes owed.
How Do I Know If I Owe the IRS?
If you owe the IRS money, you’ll receive a tax bill in the mail for the full amount. The bill that comes in the mail will inform you of the balance due. In addition, you will see any penalties or interest that you owe tacked on to your tax bill. It’s essential to understand that this bill is just the IRS’s first step in the collection process. If left unpaid, daily compound interest and monthly penalties will begin to accrue. While receiving a bill can be a startling way to learn that you owe the IRS money, another way to be notified that you have a tax bill is by filing or reviewing tax returns. If you have any unfiled tax returns floating around, it’s important to file them to start getting tax payments taken care of before penalties and interest begin accruing.
You may also discover that you owe the IRS back taxes using the IRS.gov website. Following the registration process, you’ll be able to use the IRS Account Information portal to view how much you owe in taxes for each tax year. If you’re not necessarily tech-savvy, you can also contact the IRS by phone at 1-800-829-1040 (toll-free) from 7:00 a.m. to 7 p.m. from Monday through Friday.
How To Figure Out How Much You Owe the IRS
If you’re unsure about how much you owe the IRS, there are several ways to find out. You may want to first check your tax records to confirm you’ve paid your tax bill for the most recent tax year. However, there are more direct ways if you don’t have clear tax records available.
Request a Transcript
If you’ve received a bill from the IRS, the amount on the bill is the amount you owe. However, you may be curious to see your tax transcript for yourself to do your own analysis. You can do this by requesting a copy of your IRS transcript online. If you have an IRS account set up already, you can view the transcript online. If you don’t have an IRS account, you can request that the transcript is mailed to you as long as you provide your Social Security number, date of birth, and the mailing address associated with your last tax return. Transcripts usually arrive within 10 days.
Visit an IRS Office
You can visit your local IRS Tax Assistance Center (TAC) to inquire about a current IRS balance. Simply call the office in your area to make an appointment. Be sure to bring along a current government-issued photo ID and your Social Security number.
Ask a Tax Professional
Of course, the numbers that you receive from the IRS will be based on the records and findings of the IRS. Your records may show that the IRS taxes owed are actually lower. This is where it can be beneficial to go over your tax records and payments with a tax professional who specializes in tax problems.
Why Do I Owe Taxes?
People can owe taxes for reasons that range from improper tax preparation to math errors. It’s not necessarily true that only people who intentionally skip tax payments can owe the IRS money. In many cases, people owe tax money because they made incomplete tax payments.
Here’s a look at common reasons why people end up owing the IRS money:
- You forgot to file taxes.
- You filed your taxes incorrectly.
- You didn’t realize you owed taxes.
- You didn’t hold enough from your paychecks to cover your tax bill throughout the year.
- You didn’t properly adjust your tax planning strategy when your tax bill rose.
- You failed to adjust your withholding amount to keep up with changes in the tax code.
- You made a math error when filing your taxes.
- You made a math error when paying your tax bill.
- You didn’t have enough to pay your full tax bill when you filed your taxes.
Unfortunately for taxpayers, you will still owe money even if you didn’t intentionally skip paying your taxes. If you forgot to pay the IRS, there’s a good chance that you also forgot to handle your state taxes. As a result, you could be about to receive a tax bill for your state taxes. It’s crucial to get caught up with either filing or paying state taxes to avoid the consequences of not filing or paying state taxes.
How Long Can You Owe the IRS?
Penalties begin accruing the day after the filing deadline. Generally, there is a 10-year statute of limitations on IRS collections. That means that the IRS has 10 years from the date that your taxes were assessed to attempt to collect payment. However, the statute for collecting state taxes varies by state.
How to Pay Your Tax Bill to Stop Owing the IRS
The simplest way to stop owing the IRS money is to pay your bill in full. However, not everyone is in a position to make a lump cash payment to the IRS. The IRS is generally very generous with offering tax relief solutions for taxpayers who are unable to make payments in full. There’s only one general condition that impacts your eligibility: you need to file all your tax returns.
The most common tax relief solution offered by the IRS is something called an Installment Agreement (IA). Under this arrangement, a taxpayer has 72 months (six years) to pay off a tax debt using monthly payments. Additionally, an option like an Offer in Compromise (OIC) may allow you to settle your IRS tax debt for less than the full amount.
Are Failure to Pay and Failure to File the Same Thing?
The last big detail to cover regarding how to take care of an IRS tax debt is the way the IRS handles failure to pay versus failure to file. Failure to pay applies if you do not file by the filing deadline without requesting an extension. Failure to file applies if you don’t pay the taxes reported on your return by the deadline. While you can request an extension to file, the extension doesn’t actually extend your payment deadline. That means you’re required to pay your anticipated owed tax bill by the deadline even if you don’t file your taxes due to an extension. A failure-to-pay penalty may apply if you didn’t pay your full tax amount by the filing deadline. Generally, the failure-to-file penalty is more than the failure-to-pay penalty.
Do I Owe the IRS? Find Out With Help From Tax Professionals
Let the tax professionals at Tax Group Center help you with back taxes owed to the IRS. Our team will help you determine the exact amount the IRS claims you owe. Next, we’ll help you work out payment options or tax relief solutions with the IRS. We’ve been helping taxpayers settle with the IRS for 30 years. Contact us today!