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In today’s economic climate, many taxpayers find themselves with back tax balances they are unable to pay. When faced with this situation, the worst choice a taxpayer can make is to ignore the problem and hope that it will go away. The consequences of disregarding an overdue tax liability can be severe and, with more resources being allocated to the IRS for enforcement, it is going to be increasingly difficult for taxpayers who have back tax balances to remain under the radar. The best course of action is to pay the back tax balance in full if resources allow and, if not, to make maximum use of the use of the tax settlement options offered by the IRS. Although numerous new tax resolution programs have recently been initiated, the qualifying criteria are complex and may be confusing. For this reason, a taxpayer who owes back taxes may be best served by contacting a tax settlement professional for help in determining which option will offer the most effective resolution for their specific set of circumstances.
Assessment of Interest and Penalties –Back tax balances are compounded over time by the addition of interest and penalties to the extent that is not uncommon for these additional charges to total as much as 50% of the original tax liability.
Enforced Collection Activities – Although the IRS will begin the process of collecting back taxes with passive techniques such as the issuing of an IRS letter or an IRS Notice, the collection methods become more aggressive the longer the tax bill is left unpaid. Eventually, the IRS may file a tax lien, issue a tax levy or initiate a wage garnishment.