{"id":354027,"date":"2017-08-16T19:27:14","date_gmt":"2017-08-17T00:27:14","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/tax\/tax-problems-audits\/tips-on-paying-back-taxes.html"},"modified":"2025-02-20T13:18:31","modified_gmt":"2025-02-20T18:18:31","slug":"tips-on-paying-back-taxes","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/tax\/tax-problems-audits\/tips-on-paying-back-taxes.html","title":{"rendered":"Tips on Paying Back Taxes"},"content":{"rendered":"\n
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Tips on Paying Back Taxes<\/h1>\n
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\n By Christie Nicholson, J.D.<\/a> | Legally reviewed by Laura Temme, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

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Paying back taxes can be a daunting task, but with the right approach, you can manage and even reduce your tax debt. Communicate openly with the IRS, as they often work with taxpayers to establish repayment plans or installment agreements. For those eligible, requesting penalty abatement or submitting an Offer in Compromise could significantly lower your debt. Remember, ignoring IRS notices only worsens the situation. If overwhelmed, consult a tax professional for guidance.<\/p>\n\n <\/div>\n\n

It’s easy for taxpayers to get behind on filing and paying their taxes. However, if you fall behind, it can be difficult to get back on track. It can be especially hard for people experiencing financial hardship.<\/p>\r\n

Unfortunately, if you don’t pay your income tax bill, the IRS will commence collection activity. Depending on how much you owe, they may pursue levies, liens<\/a>, and other legal remedies to recover their money.<\/p>\r\n

Here, we’ll discuss some helpful tips on paying back your tax debt, regardless of your financial situation. We will also briefly discuss the consequences of not paying your federal taxes<\/a>.<\/p>\r\n

Paying Your Back Taxes<\/h2>\r\n

Unpaid taxes<\/a> are subject to harsh penalties and interest. These run from the date of your tax return until you repay the full amount. Not only will you pay interest, but the interest rate is high – 3% higher than the federal short-term rate. Plus, the interest compounds daily.<\/p>\r\n

If you file your taxes on time but don’t pay the balance due before the due date, the IRS may assess a failure-to-pay penalty<\/a>. The penalty for failure to pay your taxes is 0.05% of the amount you owe (monthly) and can increase to up to 25%.<\/p>\r\n

If you don’t file your return on time and owe tax, the government will also assess a failure-to-file penalty. These penalties are usually 5% of the back taxes<\/a>, up to a maximum of 25%. When your tax return is more than 60 days behind, there is also a minimum penalty of $435, or 100% of the taxes owed, whichever is lower.<\/p>\r\n

Those penalties add up. If you don’t think you can file your tax return on time, you can file for an extension<\/a>. An extension usually gives you six additional months to file your return. However, this doesn’t extend the time you have to pay your taxes. You’ll still have to pay your taxes by the tax filing deadline, usually April 15.<\/p>\r\n

Needless to say, it’s important to pay your back taxes. Next, we’ll discuss steps you can take to resolve tax problems.<\/p>\r\n

Make Sure You Actually Owe the IRS<\/h3>\r\n

If you receive a tax notice from the IRS, the first thing to do is confirm you really owe the debt. Mistakes can happen. Review your return carefully and compare it to previous tax years<\/a>. <\/p>\r\n

If you filed your own return, consider working with a tax professional or CPA<\/a> to see if you missed any deductions or tax credits.<\/p>\r\n

Make a Payment Plan and Stick to It<\/h3>\r\n

Develop a payment plan<\/a> that considers your current income and expenses, your assets, and any available credit to cover the debt. Paying down your tax debt quickly will reduce the penalties and free up more money to cover your other debts. <\/p>\r\n

However, you don’t want to propose a monthly payment installment plan that you can’t afford. Otherwise, you’ll end up in the same situation.<\/p>\r\n

IRS collection tactics<\/a> are severe. If you think your current tax debt is high, it will be even higher if you don’t abide by your installment agreement.<\/p>\r\n

Contact the IRS<\/h3>\r\n

Many people are afraid to contact the IRS. However, open communication can be to your advantage. IRS employees are used to working with people<\/a> to clear their tax liability through a repayment plan or installment agreement.<\/p>\r\n

If you request an installment agreement, that may reduce the failure to pay penalties by half. This is especially true for low-income taxpayers who cannot afford high penalties and interest. <\/p>\r\n

You can request an installment plan through the IRS website (IRS.gov<\/a>). You will have to pay an application fee but this will forestall the collection process.<\/p>\r\n

Ask the IRS to Waive Penalties<\/h3>\r\n

If you have a history of paying on time, you may be able to avoid some of the penalties and interest by asking for a first-time waiver<\/a>. <\/p>\r\n

If you have paid late before, the IRS may still offer tax relief by waiving penalties if you can show \u201creasonable cause" for the delinquency. This sort of tax help can reduce your tax bill by nearly half.<\/p>\r\n

Choose a Payment Option<\/h3>\r\n

There are several ways to pay your tax bill<\/a>, including:<\/p>\r\n