If the IRS has yet to contact you about your owed taxes, you might feel like you’ve managed to stay under their radar. It’s tempting to put off taking care of the amount you owe as long as possible. You probably think that since the IRS isn’t contacting you, the problem isn’t as serious. This kind of thinking can be particularly dangerous, as it could lead to greater penalties or issues down the line. Here’s why it’s important to take care of back taxes before the IRS contacts you.
You have more options the earlier you file.
The longer you wait to file your back taxes, the fewer options you have. If you want to keep your costs low throughout the process or claim a return you’re owed, you need to file your back taxes as quickly as possible. After three years of failing to file, your refund “expires” in most cases and you are unable to access it. These refunds are vital to keeping your costs low as they can often cancel out any additional fees.
You will pay less interest.
You will be charged interest on any tax that isn’t paid by the due date of the original return. While this, at first might not be a great amount, it can quickly become substantial. You will need to pay any added interest on your back taxes or the IRS will send you a bill for it. This is one of the many reasons why it pays to take care of your back taxes before too much time has passed.
The IRS might file on your behalf.
If the IRS is unable to contact you, they might just file a substitute for return on your behalf. While this might seem like a solution to your problem, it can be really costly. A substitute for return doesn’t take into account any potential credits or deductions that could lower your taxable income.
You might be able to avoid late fees and penalties.
If you file your back taxes on your own, prior to any contact from the IRS, you might be able to avoid paying any late fees or penalties. The IRS will catch up to you eventually, and there is no way to avoid paying these fees sooner or later. It is in your best interest to stay on the IRS’s good side by making your back taxes payment as soon as possible. The maximum penalty for unpaid taxes is 5% of the amount they owe every single month they fail to pay.
Take control of your taxes.
If you’re feeling overwhelmed by your back taxes, you don’t have to face your situation alone. A tax advisor can help you take control of your taxes and your finances so you’re able to finally move forward away from this issue. If you’re facing back taxes, act now by speaking to a tax advisor before the IRS contacts you.