HOUSTON BACK TAXES: UNDERSTANDING PENALTIES AND FEES
Back taxes can come with a variety of penalties, fees, and, eventually, late stage IRS actions such as liens or levies. The penalties and fees associated with back taxes can be different depending on whether you have failed to pay your taxes or failed to file altogether. To understand the penalties associated with back taxes, which must also be paid when you settle your tax debt, let’s take a look at the difference between failure-to-file and failure-to-pay penalties and fees.
“Failure-to-File” refers to when a taxpayer doesn’t file their tax return. Whether this is done knowingly or by accident, the penalties and fees are the same. If you are more than 60 days late in filing your tax return, the IRS will assign you a flat fee of either $135 or the amount of taxes owed, if that amount is less than $135. After this flat fee, the IRS charges an ongoing fee of 5% of your tax balance per month, until you hit a 25% cap.
“Failure-to-pay” refers to when a taxpayer files their tax return but does not pay taxes owed. This can be the case if you fail to pay either all or part of your full tax balance. Failure-to-pay is a common reason people find themselves with back taxes and this status is often the result of being unable to pay a full tax balance, rather than just neglecting to pay.
The failure-to-pay penalty is lower than the failure-to-file penalty. This fee is 0.5% of your unpaid taxes per month, rather than 5% of your tax balance per month. This fee is ten times lower than the failure-to-file fees, so it is generally best to always file your taxes, even if you think you may be unable to pay at the time of filing.
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TAX RELIEF IN HOUSTON, TEXAS: TAX RELIEF STRATEGIES
Beyond fees and penalties, back taxes can result in a number of undesirable IRS actions, such as tax liens, tax levies, and, in extreme cases, criminal charges. Whether you’re dealing with penalties, fees, or another IRS action, there are tax relief strategies that can help you eliminate your tax problems and put an end to your troubles with the IRS.
TAX HELP: EXAMPLES OF TAX DEBT RELIEF OPTIONS
For those who cannot pay their full tax debt at once but can pay their tax debt over an extended period of time, installment agreements can be an excellent option. Installment agreements are a monthly payment plan option in which you pay the IRS in monthly installments over a period of time, which is generally between 6 months to 10 years. The amount you may pay with each month with an installment agreement, as well as the time period you’ll have to pay your balance, will vary depending on your unique financial circumstances and your negotiations with the IRS (or your tax professional’s negotiations with the IRS).
There are a number of different types of installment agreements, including standard installment agreements, stair step installment agreements, streamlined installment agreements, partial pay installment agreements, and conditional expense installment agreements. Your tax professional can help you determine which type of installment agreement would be best for you.
Offer in Compromise
Those who are experiencing financial hardship may qualify for an offer in compromise (OIC), which can allow you to pay less than the full amount of tax you owe. Entry into the offer in compromise program can be challenging, as the IRS always wants to collect a taxpayer’s full tax debt whenever possible, so we generally advise seeking the services of a tax professional when seeking an OIC. However, if you are experiencing financial hardship and may qualify for an OIC, seeking one is highly beneficial, as this is one of the few IRS options that allows you to pay a tax settlement amount that is less than your full back tax amount.
Currently Non Collectible
For those experiencing extreme financial hardship, gaining currently not collectible status can be a valuable tax debt relief strategy. Currently not collectible is an IRS tax status that puts IRS actions against you on hold. While this status does not stop the accrual of penalties or fees, it can help protect you from a number of serious IRS actions, including wage garnishment, bank levies, and other IRS collection process actions.
For those facing the threat of an IRS audit, audit representation services can help you defend yourself from an IRS investigation. During an audit representation, your assigned tax professional can help you protect your rights as a taxpayer by limiting the scope of your audit to only what is legally required, organize your tax records (including personal, business, or payroll tax records), ensure you do not pay more than you owe, present the IRS with tax relief solutions on your behalf, speak with Internal Revenue agents on your behalf, appeal or defend your audit, and more.
Innocent Spouse Relief
Those who unknowingly find themselves in IRS debt as the result of their spouse’s actions can sometimes qualify for innocent spouse relief. Through this tax relief strategy, if the IRS determines that you did not know about your partner’s actions that led to your tax debt, such as incorrect or fraudulent tax preparation, you may be granted relief from your joint tax debt.
TAX DEFENSE PARTNERS: YOUR IRS PROBLEM RESOLUTION PARTNERS IN HOUSTON, TEXAS
If you’re struggling with IRS problems, our full service tax resolution services can get you relief, quickly. Our team of dedicated tax attorneys and IRS enrolled agents have years of experience resolving tax issues that range from simple to incredibly complex. Our IRS problem resolution services are tailored to your unique needs. Whether you need help negotiating the best possible installment agreement, need full audit representation, need help with future tax preparation to avoid tax problems, or if you just don’t know where to begin, our team is dedicated to giving you the best possible service and helping you pay the IRS the lowest amount allowed by law.