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Your Guide to Understanding Back Taxes, Pt. 1

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Owing back taxes can be an enormous drain on your finances.

Owing back taxes can be an enormous drain on your finances. Tax debt is perhaps one of the most punishing kinds of debt. Even so, there are some glimmers of hope despite the prospect of being audited by the IRS or facing other consequences. Once the IRS begins sending you letters regarding this matter, it’s easy to feel flustered or out of options. Fortunately, the professionals here at The Harding Group can help you out!

What If My Tax Debt is Incorrect? 

Your tax situation might not be as dire as it seems. In other words, your tax debt could be calculated incorrectly. This accounting error impacts your back taxes. Do your own research and stay in touch with the IRS. Tax resolution specialists can step in and clear everything up before the process gets too far along. 

What Penalties Are Associated with Unpaid Back Taxes? 

Unfortunately, we have some bad news. First, IRS-issued penalties and interest can stack up when your payments are late. Likewise, late filings will also bring additional fees. The late payment penalty is 0.5% a month; at first, this sounds relatively painless. However, the late filing penalty is added directly to your unpaid balance depending on when the tax deadline is.

Meanwhile, the late filing penalty is 5% per month or partial month that your tax return is in arrears. The maximum penalty is 25%, so there is some relief, at least. Even so, you are on the clock once the tax deadline arrives. As a result, your penalties will continue to accumulate until your filing is received and accepted. 

Is It Possible to Request An Extension? 

You’re allowed to request an extension. The catch is that it won’t reduce your tax debt or decrease your back taxes. Getting an extension means that you have six more months to complete your tax return. The filing deadline is May 17th, after which penalties and interest are charged to your account. A partial payment is better than nothing at all. 

Will My IRS Debts Be Written Off?  

It’s easy to think that the crushing financial burden of owing back taxes will never end. Sadly, the IRS is strict about forgiving tax debt. As a result, it doesn’t happen often, and your delinquent taxes stay on their books for ten years. The Collection Statute Expiration Date, or CSED, is the last date your debt is subject to collection. Some exceptions to this rule can apply, however. 

trust the professionals at The Harding Group

Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients. 

Are you interested in business advising, tax preparation, bookkeeping and accounting, payroll services, training + support for QuickBooks, or retirement planning?  We have the necessary expertise and years of proven results to help. 

We gladly serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of tax time, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on Facebook, Twitter, YouTube, and LinkedIn.

This entry was posted on Friday, June 18th, 2021 at 1:31 pm. Both comments and pings are currently closed.

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