IRS Back Taxes FAQ

I can't pay my taxes.  Why file?

The IRS views the failure to file a tax return as a criminal act which begins as a misdemeanor and can elevate to a felony.  However, the failure to pay the IRS is only a civil manner.  Always file a return even if you cannot pay.  You cannot qualify for any tax relief help if you have not filed your tax return(s).

IRS Back Taxes

Is it possible to get an extension and not have to pay interest and fines?

Not usually.  The IRS may extend your file date for six months, but they still require full payment by April 15th to avoid penalties and interest.  Occasionally, penalties may stop accruing, but compounding interest continues.

I didn't get my refund.  Why not?

Your refund may have been applied to a delinquent tax debt from previous IRS back taxes owed.  It can also be used to pay various delinquent government loans, overdue child support, or Social Security overpayment.  Consult with a tax attorney to verify application.

Will the IRS actually come to my house?

Yes.  If you have not responded to IRS Notices or phone calls, your case will be assigned to a local IRS Revenue Officer to locate you.  However, an IRS agent cannot enter your home without your permission unless the IRS has a court order.

Does the IRS have the right to take my home?

Yes.  The IRS has the authority to seize and sell your home, car, etc. to pay delinquent tax debts from IRS back taxes still owed.

Will I get any warning before the IRS freezes my bank accounts or seizes my assets?

Yes.  The IRS must notify the taxpayer prior to levy or seizure.  Notices must be sent certified mail to your  last known address.  However, many delinquent taxpayers move frequently and do not receive these notices.

Can you be sent to jail for not filing tax returns?

It is possible, but not likely.  The IRS considers the act of not filing tax returns as being non-compliant with tax laws.  Tax fraud or tax evasion charges are usually brought against individuals in organized crime or public figures.

Is the IRS ever willing to deal with you?

Yes.  Especially now in the current economy.  The IRS offers many tax relief options for settling back taxes.

Does a taxpayer have any rights at all?

Absolutely.  The Declaration of  Taxpayer Rights declares these rights for:

  • Protection of Your Rights
  • Privacy and Confidentiality
  • Representation by a Tax Attorney, CPA, or Federally Enrolled Agent
  • Payment of Only the Correct Amount of Tax
  • Help with Unresolved Tax Problems
  • Appeals and Judicial Review
  • Relief from Certain Penalties and Interest

What's the difference between a levy and a lien?

An IRS levy is the legal seizure of your property to satisfy a tax liability.  An IRS lien is used as security for a tax debt and will prevent you from selling or refinancing your home.

I only owe payroll taxes.  Can the IRS go after my personal assets?

Yes.  The IRS can assess the Trust Fund Recovery Penalty even if the business is defunct.  The penalty for willful failure to pay withheld income and employment taxes can be assessed against the individual(s) responsible for collecting and paying these taxes.

Will ignoring the IRS notices make them give up?

Rarely does the IRS "give up".   Ignoring the IRS will lead to more forceful collection action such as a bank account levy, wage garnishment, or seizure of property.  Responding to the IRS as soon as possible will avoid a hostile environment.

Can I settle my tax debt for less?

Yes.  You may be able to qualify for an Offer in Compromise (OIC), commonly know as the "pennies on the dollar" program.  Submitting a request for an OIC is complex and is best handle by a qualified tax attorney.

What are Installment Agreements?

Taxpayers can enter into an IRS Installment Agreement allowing monthly payments over a set period of time to fully repay the tax debt.  The IRS offers different types of agreements to best accommodate the taxpayer's financial situation.

How can I get the IRS to classify my tax debt as non-collectible?

After IRS review determines your financial circumstances, you may qualify for a Currently Not Collectible status due to:

  • Collection for back taxes would cause undue "hardship" for the taxpayer
  • Special action, i.e. military assignment, or incarceration
  • Catastrophic illness, personal or family
  • Bankruptcy or suspension of business with no remaining assets

Can my tax debt be included in bankruptcy?

Yes and no.  Payroll and federal excise taxes cannot be included.  Personal income taxes can be listed, but only if the complex criteria of the Bankruptcy Code are met.  Consult an experienced bankruptcy lawyer for guidance.

Is my accountant forced to disclose my information?

Yes.  Only information disclosed to your lawyer is protected.  That is why it is best to have a qualified tax attorney represent you in IRS negotiations.

What does "innocent spouse" mean?

If a taxpayer qualifies for "Innocent Spouse" relief, they can avoid the joint liability for any taxes, interest and penalties related to the spouse (or former spouse).

What is the statute of limitations on IRS collections?

The IRS has only 10 years to collect delinquent taxes.  Taxpayers erroneously believe if they "wait out" this period, they are home free.  This is usually not the case.  Even though it may take many years, the IRS has the ability to locate you through multiple, computer-linked sources.  Also, the 10-year statute of limitations can be extended by:

  • The IRS filing a Substitute for Return (SFR)
  • Filing an Offer in Compromise (OIC)
  • Requesting an Installment Agreement (IA)
  • Requesting an IRS hearing or appeal
  • Filing bankruptcy