Back Taxes Help

Back Taxes Help From a Tax Attorney: Relief Options and More

If you’re behind on your taxes, you are not alone – people fall behind on their filing and payment obligations for all kinds of reasons. The IRS has options for people who owe back taxes, and an attorney can help you find the best resolution for your situation. 

Don’t put it off anymore – we can help you deal with back taxes. At the W Tax Group, our team of experienced tax professionals can answer your questions and help you get back into compliance. In the meantime, check out this guide for tips on how to deal with back taxes and what to expect if you don’t pay.

Key takeaways

• What are back taxes? Unpaid IRS or state taxes.
• Resolution options – Payment plans, settlements, or hardship status.
• Consequences of not paying – Penalties, interest, tax liens, wage garnishments, and asset levies.
• Time limit – IRS has 10 years to collect most back taxes. State time limits for tax collection vary.

The role of a tax attorney – Help you abate penalties, dispute incorrect assessments, and apply for payment plans or relief options.

What Are Back Taxes?

 Back taxes refer to any old unpaid taxes that you owe to the IRS or a state revenue agency. People incur back taxes when they file but don’t pay, the IRS adjusts their return, they fail an audit, or the IRS files a substitute for return to assess taxes against them if they haven’t filed.

What If You Don’t Pay Back Taxes?

If you fail to pay your taxes, the IRS adds penalties and interest, which can cause your balance to grow quickly. 

The IRS may issue a federal tax lien. The agency also has the right to garnish your paycheck, levy your bank accounts, and even seize your personal property like homes and vehicles. If criminal tax fraud is involved, failure to pay taxes can even land you in jail.

What to Do If You Owe Back Taxes

First, figure out how much you owe. The repayment options vary based on how much you owe the IRS – for instance, if you owe between $10,000 and $49,999, you can set up a payment plan more easily than someone who owes over $50,000. Not sure how much you owe? Check out this guide to find out how much you owe the IRS.

Then, consider if you can borrow money or liquidate assets to pay off the back taxes. Or, look into IRS repayment options. 

Alternative Payment Strategies If You Owe Back Taxes

Here are some of the options taxpayers use to pay their tax debt in full:

• Refinance Your Home – If the equity in your home is enough to cover your back taxes, you may want to take out a loan to repay the taxes. Note that if the IRS has already issued a tax lien, you will typically need to request lien subordination.

• Borrow From Your Life Insurance – You may be able to borrow against whole life insurance policies. Alternatively, if it makes sense for your financial situation, you can surrender some policies for their cash value.

• Use Your 401K or Other Retirement Plan – If you have a 401k, 403B, IRA or certain pension plans, etc, you may be able to cash out or borrow against the plan. Note that cashing out before age 59.5 years generally subjects you to early withdrawal penalties and income tax. 

• Sell or Borrow Against Owned Assets – You can also sell or borrow against your assets to pay back taxes. 

If you decide to take out a loan to pay your back taxes, you may want to compare the interest rate with the IRS’s interest rate to ensure you’re paying the lowest amount possible. The IRS’s rate adjusts every quarter, and it’s the Federal Short Term Rate plus three points.

Options for Businesses That Owe Back Taxes

Your business may be profitable and yet still have payroll 941, trust fund recovery, sales tax problems, or other back tax issues. Here are some options for businesses looking for ways to pay their back taxes.

• Invoice or Account Receivable Factoring – A factoring loan can turn unpaid invoices into cash, but if you take this option, be aware that these loans generally only cover a portion of the accounts receivables so it’s not always worth the loss. 

• Family and Friends, Investors – You may be able to borrow money from a family member or friend by offering them equity (partial ownership) in your business. Be very careful and consider consulting with an attorney before taking this route.

• Borrow Against Inventory, Equipment, or Real Estate – Your business may have inventory, raw materials, finished goods, machinery, or equipment that you can borrow against to get a percentage of their value. You will have to look for a specialized lender to help with this type of loan.

Before pursuing any of these options, you may want to look into the IRS’s repayment and relief options. Depending on the situation, the IRS’s terms may be better than the above.

IRS Relief Options for Back Taxes

If you owe back taxes, you may want to explore the following options available from the IRS. A back-taxes attorney can help you determine which option is best for your situation.

• Offer in compromise – Settlement agreement to pay off the back taxes for less than owed between you and the IRS. 
• Installment agreements – Repayment through a monthly plan.
• Currently not collectible – If you truly don’t have the money to pay your taxes, it’s possible to get the IRS to stop collections by proving that your account should be placed in Currently Not Collectible status.

A qualified and experienced tax lawyer with the W Tax Group can help you with any of the above back tax solutions.

Can a Tax Lawyer Provide Back Taxes Help?

Yes, a tax lawyer can help you with your back taxes by going over your finances, income, other liabilities, assets, and your personal situation. Then, they can help with finding the best legal solution to get your taxes paid off once and for all. 

Handling this situation on your own is stressful, and it’s unnecessary when you can have legal help beside you. Not only will your lawyer help you figure out how to pay your back taxes, but they can also communicate with the IRS on your behalf.

Tax attorneys deal with resolving tax debt every day. They know the deadlines, the rules, the consequences, and the options. They also know what the IRS wants to see and hear — so they have an advantage in negotiations.

Here’s a brief overview of what to expect when you hire a tax attorney for help with back taxes.

1. Free consultation — Most tax attorneys start with a free consultation. This is the tax attorney’s chance to get to know more about your situation, but it’s also your opportunity to “interview” the tax attorney and decide if they’re a good fit for your situation.
2. Power of attorney — A power of attorney gives the tax attorney the right to communicate with the IRS on your behalf. The power of attorney form is one of the first forms that you will sign when you get back tax help from a tax attorney.
3. Filing unfiled returns — Typically, you only need to file the last six years’ worth of returns, but you must do so before applying for most payment plans or settlements. Your tax attorney will let you know which documents they need.
4. Applying for tax relief programs — If you don’t have unfiled returns, this may be your first step. There are all kinds of relief programs including innocent spouse relief and offer in compromise. If you don’t qualify for a relief option, the tax attorney will move on to penalty abatement and making payment arrangements.
5. Requesting penalty abatement — The IRS is willing to remove penalties for all kinds of reasons. Failure to file and failure to pay penalties can get up to 25% of your tax balance each, and they accrue interest on top of that amount. 
6. Setting up payment plans — You will need to set up a payment plan or explore one of the options discussed on this page so that you can pay off your taxes. 

These are the general steps that occur when you work with a tax attorney, but there’s also a lot more that can happen. The exact process varies based on your situation. 

But you don’t have to go in blind. During the consultation, tell the attorney about your situation, and then, just ask what the process will look like moving forward. 

Although they may not be able to preplan every detail because there are often surprises along the way, they will be able to use their experience to give you a general idea of what’s likely to happen.

Signs You Should Contact a Tax Attorney About Back Taxes

Here’s the truth — you don’t always need a tax attorney to deal with back taxes. However, when you do need their help, their services can pay for themselves. When you work with an IRS tax attorney, they can help you find all of the legitimate ways to reduce your tax debt. They can help you find the most cost-effective tax resolution option, and they can help protect you against costly accusations of tax fraud or similar issues. All of this saves you money.

Wondering if your situation merits contacting a tax attorney? Here are some signs that you should contact a tax attorney about your back taxes or other IRS-related tax issues. 

• You’re tired of dealing with the IRS — Yes, stress is a legitimate reason to outsource this task to a tax attorney.
• You’re confused by the IRS notices — The IRS uses a lot of complex (and often scary) language, and you should contact a tax attorney if you’re confused.
• You don’t understand your options — Tax attorneys deal with the IRS and state tax agencies every day. They can help you understand all of your options, and they can help you identify the best option for your situation.
• You want help with the paperwork — Even if you’ve identified an option, you may still need help with the paperwork. A tax attorney can be critical for ensuring you fill out paperwork correctly.
• You want to increase your chance of success — A tax attorney cannot guarantee that you’ll get accepted to a program. The IRS has the final say on everything. But tax attorneys deal with these forms every day. They know how to increase your odds of approval by submitting the information the IRS expects to see.
• You’re facing a lot of penalties — Penalties add up quickly and getting them removed often requires you to make an argument about statutory elements or reasonable cause. Again, a tax attorney can lead the charge here.
• You’re dealing with back taxes due to an audit — If you’ve been paying your back taxes but you get an assessment after an audit, that can be frustrating. It’s especially hard if you don’t agree with the audit results. Depending on the time frame since the audit, the tax attorney may be able to help you appeal or apply for an equivalent hearing. They can also help you make arrangements on the tax debt from the audit.
• You’re facing tax evasion or tax fraud charges — You definitely need a tax attorney. Don’t deal with these types of accusations on your own. There can be fines in the hundreds of thousands, plus jail time. Make sure to call a tax attorney if tax fraud is even mentioned by the IRS.

These are just a few of the reasons that you should contact a tax attorney about your back taxes. If you don’t see your reason listed, that doesn’t mean you don’t need an attorney. It just means that your reason is outside of the scope of this guide. Again, a free consultation with an IRS tax lawyer can help you decide if you need their assistance.

FAQs About Back Taxes

Here are some of the questions we often hear about back taxes. If you don’t see your concern addressed, contact us directly.

What are the penalties for back taxes?

The penalties can get up to 50% of your original assessed balance. Failure to file penalties are 5% per month until you file up to 25% of the assessed balance. Failure to pay penalties are .25 to 1% of your balance every month, until you pay, up to 25% of the balance.

Should you stop filing tax returns if you owe back taxes?

No. If you have back taxes, you should still continue to file your IRS tax return as required. If you owe additional money, your back taxes owed will increase. However, by filing on time, you avoid expensive penalties like the failure-to-file penalty. Keep in mind that it’s always better to file and not pay than it is to not file and not pay.

What if you owe back taxes and your return shows a refund?

If you file and get a refund, the IRS will apply the refund to your tax debt, and then, that will lower the amount of your back taxes that you owe. There are ways to keep your refund when you owe back taxes, but this can be tricky and generally requires you to prove financial hardship. 

How can a back taxes attorney help you?

An attorney can help you figure out how much you owe and create the most affordable path to get back into compliance with the IRS. They can request penalty abatement and help you avoid IRS collection actions.

What about state back taxes?

Your state may also assess penalties and take involuntary collection actions if you owe back taxes. You will have to deal with each of these issues separately. You pay state taxes to the state taxing authority, and federal taxes go to the IRS. As a result, you can never use the same payment plan or resolution option for both of these different types of taxes. 

To be on the safe side, make sure that your tax attorney or tax resolution firm has experience dealing with back taxes from both the IRS and your state. At the W Tax Group, we’re experienced and licensed in every state. So, we would love to help you whether you live in Alabama, Wyoming, or any of the states in between.

Back Tax Help Is a Phone Call Away

If you’re feeling stressed and worried about how to pay off your back taxes, you should realize this issue has been solved thousands of times before and it can be done for you as well.

Get the IRS back tax help you need by calling the W Tax Group today.

Free Back Taxes Consultation:

1-877-500-4930