How Do I Know If I Owe Back Taxes?

In some cases, it’s easy to guess that you owe back taxes. For example, if you haven’t filed a tax return in years, it’s fair to assume that at some point, you will receive an IRS notice. In other cases, finding out you have a balance due with the IRS can be a surprise. You should always know where you stand with the IRS to avoid financial challenges later. Here are some ways to find out if you owe back taxes.

Sometimes, finding out you owe back taxes can be abrupt and in the form of an IRS notice in the mail. The IRS can send a notice for several reasons, some being for information purposes only. The notices that can raise concern are those notifying of a balance due, an intent to levy, an intent to seize assets, and others. Taxpayers should always be aware of tax scams. All IRS notices will be mailed, and any correspondence in the form of text, email, or social media message should be treated as spam. The IRS may contact you via phone, but the initial notice will always be mailed.

If you haven’t received an IRS notice, you may still owe back taxes. Using the IRS Online Account, taxpayers can look up their tax records, get tax filing information, view payment history, and view account balances. If you do in fact owe a balance, your tax liability will be broken down in your account by tax year. From here, you may make payments, contact the IRS about your account, or decide how to handle your tax bill.

Owing back taxes can result in significant penalties and interest accruals. The failure to pay penalty is 0.5% for each month, or part of a month, up to 25% of the unpaid tax. The current interest rate for underpayment is 6%. This rate is compounded daily and can change each quarter. If you owe the IRS, it’s important to know your options and act as quickly as possible. The most common actions taken are setting up installment agreements with the IRS, requesting extensions, paying a balance in full, and applying for hardship, which can include receiving currently noncollectible status or an offer in compromise. Dealing with the IRS can be time-consuming and intimidating. Seeking help from a reputable tax relief company can not only alleviate stress but can also result in savings while resolving your tax debt.