What Should You Do If You Owe Back Taxes to the IRS?

Discovering that you owe back taxes to the IRS can be stressful, especially when penalties and interest are continuing to accumulate. However, ignoring the balance generally does not make the problem go away.

The appropriate solution depends on your financial situation, how much you owe, whether all required tax returns have been filed, and other circumstances surrounding the tax debt.

What Are Back Taxes?

Back taxes are taxes that remain unpaid after their original payment deadline.

They can result from several situations, including underpaying taxes during the year, failing to make sufficient estimated tax payments, filing a return without paying the full balance, or having additional tax assessed later.

Penalties and interest may continue to accrue while an eligible balance remains unpaid.

1. Don't Ignore the Tax Balance

One of the most important steps is simply addressing the situation.

Leaving IRS notices unanswered can potentially lead to additional collection activity and make the issue more difficult to resolve.

Review any correspondence you have received and determine exactly what tax years and balances are involved.

2. Make Sure Your Tax Returns Are Filed

Before addressing unpaid taxes, determine whether you have any unfiled tax returns.

Filing outstanding returns is often an important part of becoming current with your federal tax obligations and evaluating possible resolution options.

If you're several years behind, gathering income records and reconstructing missing financial information may be necessary.

3. Confirm How Much You Actually Owe

Before deciding how to resolve a tax debt, verify the balance.

Review the underlying tax, penalties, interest, payments already made, and the tax years involved.

In some situations, correcting a previously filed return or resolving an error may change the amount due.

4. Consider Paying What You Can

If you're unable to pay the entire balance immediately, paying a portion may still reduce the amount on which additional interest and applicable penalties accumulate.

However, don't assume that being unable to pay everything means there are no other options.

The IRS provides different collection and payment arrangements depending on the taxpayer's circumstances.

5. Explore an IRS Payment Plan

Some taxpayers may qualify for an installment agreement, allowing an outstanding tax balance to be paid over time.

The available arrangement can depend on factors such as the amount owed, filing compliance, and the taxpayer's financial circumstances.

A payment plan does not necessarily eliminate penalties or interest, but it may provide a structured way to address the debt.

6. Determine Whether Other Resolution Options Apply

Depending on the circumstances, additional tax-resolution options may be worth evaluating.

These can potentially include:

• Installment agreements

• Penalty relief

• Offers in compromise

• Currently not collectible status

• Other IRS collection alternatives

Eligibility varies considerably. An option that works for one taxpayer may not be appropriate for another.

7. Respond to IRS Notices

If the IRS sends correspondence regarding an unpaid balance, read the notice carefully and pay attention to any response deadlines.

The notice should generally identify the issue, amount involved, and actions the IRS expects.

Keeping copies of IRS correspondence and documenting responses can also help maintain an organized record of the matter.

When Should You Seek Professional Help?

Professional assistance may be particularly useful when you owe taxes for multiple years, have unfiled returns, are receiving collection notices, disagree with the amount owed, or simply aren't sure which resolution option is appropriate.

A CPA can review the tax situation, help bring required filings current, communicate with the IRS when appropriate, and help evaluate potential resolution strategies.

Take the First Step Toward Resolving Back Taxes

Tax problems are often easier to address when action is taken sooner rather than later.

James Ridout CPA provides back-tax assistance, prior-year tax preparation, IRS payment-plan guidance, penalty-abatement assistance, IRS notice support, and tax resolution services for individuals and businesses.

Owe back taxes or have unresolved IRS issues? Schedule a consultation with our team to discuss your situation and potential next steps.