What Is a Past Due Tax Obligation?

If you’re worried about paying your IRS taxes, you’re not alone. In fact, research shows that over a third of US taxpayers are nervous about filing this year’s tax return.

The issue is that failing to file on time – or failing to pay – could lead to “past due” tax obligations. But what are past due IRS tax obligations, and how should you manage tax debt? Our tax specialists explore the answers to these questions and more below.

What Is the Meaning of a Past Due IRS Tax Obligation?

A past due tax obligation is any tax you owe but didn’t pay on time. In other words, a past due tax obligation is simple outstanding tax debt, or “back taxes”.

• You can owe back taxes at any level, including federal or local level. Outstanding IRS tax debt is any overdue federal tax you owe.
• It doesn’t matter whether you partially or fully underpaid – any outstanding amount counts as tax debt.
• Past due tax debt can lead to serious enforcement action, including fines, penalties, and even property seizure.

Outstanding tax debt can quickly add up, especially if you owe back taxes for more than one year. The Innovative Tax Relief team can help you seize control of your finances and devise a plan for paying the debt.

How Does Outstanding Tax Debt Occur?

It’s surprisingly easy for tax debt to occur. The most common reasons for tax debt are:

• Filing errors
• Late or missed tax filing
• Tax miscalculations
• Failing to budget for taxes

In most cases, tax debt occurs due to an honest mistake or oversight.

How Do I Know if I Have Outstanding Tax Debt?

Unsure if you’re up to date with your IRS, state, or local taxes? Here are some tips for checking whether you may have unpaid or unfiled taxes.

• Check your IRS online account. It will show you the breakdown of previous tax returns by tax year.
• Make sure the IRS have not contacted you. The IRS will send you written notice if you have overdue tax returns or outstanding tax debt.
• Review your old returns. You may spot errors which suggest you have past due IRS tax obligations.
• Contact tax specialists. A tax specialist can evaluate your tax liabilities and determine if you owe any money. We offer all prospective clients a free tax consultation, so don’t hesitate to reach out to us.

What Are the Penalties for a Past Due IRS Tax Obligation?

The penalties depend on various factors, including:

• How much tax you owe
• Whether you deliberately tried to underpay tax, or did so deliberately
• If you owe tax debt for more than one year
• Your willingness to arrange a payment plan

The most common penalties for overdue taxes are:

• Late payment penalty: For each month of tax owed, the IRS charges around 5% of the outstanding amount.
• Interest on overdue taxes: The longer back taxes remain outstanding, the more interest you could incur. This means you could end up owing far more in the long run.
• Wage garnishment: Legally withholding part of your paycheck to satisfy the tax debt.
• Tax lien: A legal claim against your property, such as your bank account, to “guarantee” payment of the tax debt.

In some cases, the IRS imposes a tax levy. A tax levy is more than just a claim against your property. It allows the IRS to take the next step and sell your property to cover the back taxes.

Contact our team immediately if you are facing IRS enforcement action. We’ll explore your options and help you negotiate with the IRS.

Can Tax Refunds Be Applied to Past Obligations?

Yes. If you’re due a tax refund, US federal tax laws allow the government to “offset” this refund and use it to pay outstanding tax debt. In other words, although you may be due a tax refund, you won’t receive the full amount. Depending on the amount owed, the IRS may use your whole refund to pay the debt. In such cases, you won’t receive anything.

How Do I Handle Past Due IRS Tax Obligations?

First, try not to panic. It’s often possible to avoid the most serious enforcement action if you act quickly and efficiently. To give yourself the best chance of a favorable outcome, here are some ways you might handle back taxes.

• Evaluate your tax liabilities. Once you have a clear picture of your outstanding tax debt, you can devise a plan for paying what you owe.
• File your taxes even if you can’t pay them. Otherwise, you risk additional late or missed filing penalties.
• Know what you can afford to pay. Even if you can’t pay the full amount, it’s often best to offer some payment unless doing so causes severe financial hardship.
• Contact the IRS. It’s often possible to arrange a payment plan, ask for more time to pay, or set up an instalment agreement. Sometimes, the IRS will agree to accept less than what you owe, or they’ll postpone collection if you truly can’t afford to pay.
• Ask our team for help. We can contact the IRS and handle negotiations on your behalf. We’ll ensure that you’re treated fairly, and we’ll make the process seem less overwhelming.

How Can I Avoid Outstanding Tax Debt?

Want to avoid tax debt now or in the future? Here are some suggestions for staying in control of your tax liabilities.

• Budget for your tax bill throughout the year, rather than waiting until tax season to work out what you owe.
• Reach out for help the moment you suspect that you’ll struggle to pay your tax bill. The sooner you identify the problem, the easier it may be to solve.
• Have a tax plan. Small business owners can reduce their tax liabilities – and avoid unexpected penalties – with careful planning.
• Look for ways to mitigate your tax liabilities. For example, you might consider retirement planning, or financial modeling to project what you owe.

Get Help Managing Past Due IRS Tax Obligations

Concerned about past due tax obligations? Don’t struggle alone. Instead, contact Innovative Tax Relief. Our tax team is committed to finding effective – and innovative – ways to help you handle tax debt. From IRS representation to lien removal, we can assist with any tax concern you have.

Don’t struggle with tax debt alone. Approach your financial future with confidence. Contact us now for a tax consultation.