Few things strike fear and dread into the hearts of Americans like past due tax notices from the Internal Revenue Service (IRS). There is no doubt that past due tax notifications are stressful and often present a financial commitment that is difficult to meet. However, overdue tax notifications should not be ignored and taxpayers should take specific steps to avoid additional penalties and potential criminal prosecutions for failing to pay taxes.
File Your Taxes on Time
It is important to file your taxes on time every single year. It is important to file your tax return even if you do not have the money to pay the taxes that are due. Failure to file your taxes on time will not erase your tax obligations but will, instead, increase the amount that you owe because of penalties and interest that will accrue. If you do not file a tax return, the IRS may complete a tax return for you and send you the bill. The IRS completed tax return may not accurately reflect all of your deductions and credits and you may end up with a higher tax bill then you would have had you prepared and filed it yourself.
If you owe money on your tax return that you cannot pay then you should contact the IRS to develop a payment plan. The IRS will work with you to create a payment plan that fits into your budget and, as long as you comply with the terms of the payment plan, no further criminal charges or legal action will be taken against you. However, interest and penalties will continue to accrue as long as the tax debt remains outstanding.
Overdue taxes should be addressed as soon as possible to avoid possible criminal charges for tax evasion and expensive IRS installment plans to pay back taxes. The IRS may negotiate a compromise payment with an overdue tax payer in some circumstances. The IRS may also offer an extension of time to pay if the tax payer is experiencing a significant economic hardship.
If a compromise payment or extension of time to pay cannot be negotiated then the taxpayer will either need to pay the outstanding tax balance or negotiate an installment plan with the IRS. The penalties and interest that are charged on IRS installment plans can be significant. Some taxpayers find it beneficial to pay the tax debt using credit cards or personal assets. A tax attorney or an accountant can help you understand the most productive and financially advantageous way for you to fulfill your overdue tax commitment to the IRS.
It is important to remember that IRS tax obligations do not go away if you fail to file a tax return or ignore a tax bill. The best way to deal with tax obligations is to communicate with the IRS, your tax attorney and your accountant to work out a solution that fulfills your tax obligations without leaving you vulnerable to future legal action or significant financial penalties.
The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.