6 Common Back Tax Mistakes

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Each year, the IRS requires citizens to remit a certain amount of taxes based on their revenue. Unfortunately, when facing financial challenges, you may find it hard to pay what you owe. In some cases, you may also make mistakes when calculating your taxes and remit a lower amount. If you owe taxes from previous years, it is essential to clear them as soon as possible. Besides, take various precautions to protect yourself and your business from audits and asset freezing. Are you wondering which mistakes to avoid when owing to the IRS? Read on to discover six common blunders people make with back taxes and how you can prevent them.

1. Failing to Confirm Details on the Notice Letter

Once the IRS notices that you owe them taxes, they will send a notice explaining the reason for the contact and instructions on handling the issue at hand. Most people often fail to confirm the details indicated then end up repaying an amount higher than what they owe. After receiving notice, confirm if the details indicated are correct. You can do this by comparing it with tax forms from the year in question. This way, you can correct an erroneous tax bill and prevent paying higher fines and penalties.

2. Not Responding to the IRS

Most IRS notices often indicate that you should respond by a certain date. Failing to do this can cause wage garnishment and bank account or asset freezing, worsening your financial situation. Most IRS notices often indicate that you should respond by a certain date. Failing to do this can cause wage garnishment and bank account or asset freezing, worsening your financial situation.

3. Delaying to Select a Payment Plan

The IRS offers payment plans to help clear back taxes when facing financial problems. Still, most people delay selecting a suitable tax relief program, leading to interest accumulation. Waiting too long to start repaying the debt also affects credit scores and financial credibility. The best way to avoid this issue is by picking a suitable repayment plan quickly. Some of the programs to consider are installment agreement, offer in compromise, and IRS Fresh Start. 

4. Paying Taxes with Credit

Another common mistake with back taxes is borrowing money to repay it. While you may want to clear your debt faster, it is crucial to consider your financial situation. Taking out a loan or paying tax bills with a credit card charging a high-interest rate will further affect your finances. In the long run, you will end up spending a significantly high amount. Avoid further damage to your assets by applying for a suitable IRS repayment program. This way, you have more time to clear the debt with limited straining or financial pressure.

5. Failing to Seek Professional Help

While you may find it less expensive to deal with the IRS alone, it may lead to costly mistakes. Without professional help, you may reduce the chances of qualifying for a repayment program. Moreover, you increase the chances of higher penalties and fines after failing to abide by IRS policies. Working with a resolution expert can help you deal with back taxes more efficiently. These experts will ensure you select a payment plan that is suitable for your financial status. 

6. Inadequate Documentation

If you do not keep proper records of your interactions with the IRS, it may be hard to provide evidence for a claim. Besides that, following up on your application may be challenging and time-consuming. Avoid this back tax mistake by keeping copies of all documents shared by or with the IRS. Further, ensure you note the name of the personnel you converse with for simplified follow-up. If possible, record these conversations as you may need them for future reference.

Contact Tax Industry to Help Deal with Back Taxes

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Tax Industry, we offer specialized resolution services to help you deal with IRS debt.  Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today for back tax filing and relief services.

What to Do When Your Business Owes Back Taxes

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Most small business owners struggle to manage their taxes and other accounting functions. Usually, you must accomplish many roles with limited staff, and so non-immediate administrative functions take a back burner in the face of operational crises.


The IRS doesn’t care about the demands on the plate of a small business owner, only that you fulfill your obligations on time and in full. Otherwise, you risk accruing many penalties, fines, and interest on back taxes.


If you ever find that your small business owes overdue taxes, follow these steps to get back into the IRS’s good books and keep your business from losing valuable funds. The thing to remember is that the IRS doesn’t want to have to close your business.


Therefore, you can take certain steps to make things right and keep your business running. Here’s what you should do:


1. Stay in Touch


You must be proactive about contacting the IRS if you haven’t filed or paid taxes on time. Even if the agency goes quiet, they will always come back – and often at an inopportune time for you. Meanwhile, your interests and fines keep increasing, and they may create a debt so big your business can’t afford to pay it.


Note that the IRS has massive legal powers to collect overdue taxes. They can take almost anything you own and freeze your assets without needing a court order. They can also close down your operations and seize assets to pay off the tax debt.


2. Take Advantage of Time


Because the IRS is one agency managing thousands of businesses, you can take advantage of time, which is on your side if you act right away. Often, you’ll receive computerized tax bills followed by phone calls. Only if you ignore these will a person be assigned to your case.


From the time you notice there’s a lapse in your taxes, notify the IRS (or respond to their notification) and always cooperate. Provide the financial information that IRS collectors ask for – you should never lie to the IRS, but be careful not to disclose too much. Only provide the information they have asked for, unless you have been served with a formal summons.


3. Negotiate for a Discount or Payment Plan


In most instances, the IRS allows business owners to pay overdue taxes in monthly instalments. The only downside is that interests and penalties continue to accrue on the outstanding amounts. If you are able to make a single payment, you can also ask for a discount on the total amount owed.


About 25 percent of businesses are successful in applying for the Offer in Compromise through the OIC process. This is a lengthy formal process that allows businesses in a precarious financial situation to apply for the IRS to accept a fraction of the tax they owe.


When the IRS assesses your application and believes that they won’t collect more in future, they will agree to the Offer in Compromise to settle your tax debt.


4. Request for “Uncollectible” Status


If your business is in dire shape, you can request the IRS to temporarily place your account under the “Uncollectible” status. If they agree, they will stop collection notices for some time. However, you will still owe the penalties and tax by the end, and interest will accrue for the period the account is “uncollectible”.


In the direst circumstances, you may have to file for bankruptcy. This is a complex and complicated legal process that must only be a final resort. In some cases, it can wipe out your tax debt, but this comes at a high price. Always consult a tax debt agency before filing for bankruptcy.


5. Seek Professional Assistance


Once you find out that you owe overdue taxes, your best move is to consult tax debt professionals. A tax debt agency can help you assess your financial situation and the taxes you owe and advise you on the best cause of action. Professional tax preparer s in the team can also file and negotiate on your business’s behalf with the IRS.

Once you sort your back taxes, prioritize tax payments in future and ensure you file your returns in time.


Talk to a Professional Today

File Back Taxes and COVID-19 Tax Deadline

On 20th March 2020, the Treasury Department made an announcement stating the guidelines for the COVID-19 tax deadline. Certain businesses and taxpayers now have a 90-day extension for filing and paying their tax liability for 2019. The deadline for tax filing is 15th July 2020. If you are unable to file back taxes on time, you can still request a 3-month extension and file back taxes by 15th October 2020. The deadline for paying the taxes has also been extended to 15th July 2020. If you are able to pay your taxes before this deadline, you won't have to pay any additional penalties or interest.

Coronavirus pandemic has affected the world in a way that it’ll take us years to get back to normal. Every country has been trying its best to make it a little less stressful for its citizens. In this direction, the United States has also granted an extension to help its taxpayers with back taxes filing. Now, the taxpayers can enjoy a 90-day payment extension to file back taxes. This has brought a sigh of relief for many. Here is all that you need to know about the extension.

How To File Back Taxes After The COVID-19 Extension

The Corona Virus that originated in the Wuhan district of China has infected about 2.6 million people worldwide. Government and private organizations across the globe are counting costs because of this pandemic. In the United States, unemployment reached a record high and ended a decade of expansion efforts. But, the government is trying its best to make sure that the citizens are able to financially survive this pandemic. For this, the tax day has now shifted from 15th April 2020 to 15th July 2020. This change is applicable to the deadline to file back taxes. However, the IRS is still accepting returns and processing all the refunds. 

Here are the most common questions asked about the changes in the deadline made because of the Coronavirus:

Which taxpayers are eligible for the tax payment and filing deferral?

The following filers are eligible for the coronavirus tax extension:

  • Corporations who file Form 1120
  • Individuals for file Form 1040
  • States and trusts that file Form 1041
  • Fiscal year associations, companies, and partnerships who had 15th April 2020 as their due date

What must be done to delay the tax filing and payment?

The process to file back taxes or an extension is normal as before. Only the deadline has extended to 15th July. When you file the return, the special coronavirus extension for 90-days will be applied automatically. This means that all the penalties and interest are waived for 90 days. The same is applicable for paying the taxes as well. For all the qualifying businesses and taxpayers, no interest or penalties will accrue if they make the payment by 15th July.

What can I do if I can’t file back taxes by the new deadline?

If you are unable to file back taxes by 15th July 2020, you can request an extension by filing Form 4868. This way, you will have a 3-month extension and would have to file back taxes by 15th October 2020. However, the extension is not applicable to paying the taxes. The deadline for the payment is 15th July 2020.

How does this extension apply to refunds?

The extension won’t have any effect on the refund. According to the Treasury Department, all the taxpayers will be receiving their refunds in the normal time period. For example, in the case of electronic filing, 9/10 people will get their refunds in less than 21 days.

What payments are covered by this deferral?

The coronavirus tax deadline covers all the income tax payments along with the penalties and interest associated with it like failure-to-file or failure-to-pay penalty. Also, all the estimated tax payments and included tax payments on self-employment income that were due on 15th April 2020 are covered as well.

  1. Is there a limit on the amount of payment that can be deferred?

No, there is no limit on the tax payment amount that can be deferred.

Is the deferral applicable to the estimated tax payments of 2020 including the estimated taxes on self-employment income?

It is dependent on the date of the payment. For the estimated tax payment of first-quarter 2020, the deferral is applicable. This means that you can make the tax payment by 15th July 2020. For the estimated tax payment of second-quarter 2020, the deferral is not applicable. Also, there will be no waiver or deferral for the failure-to-pay penalty for estimated tax payments.

Is the deferral applicable to the state tax returns as well?

All the states have been issuing their own guidelines and deadlines to file back taxes. In some cases, it is the same as that of the federal guidelines while in others, it is different. You should check your state guidelines to ensure that you are eligible for the deferral.

Does this deferral mean that we don’t owe any taxes or need not file back taxes for the year 2019?

No. This deferral is only extending the deadline for the tax liability. Starting from 16th July 2020, all the penalties and interest will start to accrue on the outstanding tax payments. 

You can take the help of a tax resolution service to help you with the COVID-19 tax extension. A right tax resolution service will help you file back taxes and get the maximum possible refund by making legitimate claims and deductions. For some tax resolution firms, all you have to do is bring the documents to their offices. You won’t have to wait at all and a tax expert will do all your work for you. After they have completed the return, they will send a completed return electronically that you can review and approve.

Back taxes filing isn’t easy. However, the experts in the field can make it easy for you. Take the help of tax professionals while preparing your returns. They know how to file back taxes and will help eliminate errors. With tax experts by your side, you can rest assured that your tax returns are prepared correctly. Contact the best tax relief firm to hire a tax attorney today!