Back taxes are taxes owed from a previous year or period. When a person owes taxes, but does not pay them when they are due, the result is back taxes. Likewise, underpaying tax obligations also results in back taxes. A person may underpay taxes or fail to report taxable income intentionally or by accident. Regardless of the reason, however, tax agencies have the right to demand immediate payment and impose significant fines, penalties, and interest as well.
Though an individual may owe back taxes to a local, state, or federal tax agency, the phrase is most often used in reference to federal income taxes. Each year, an amazing number of people in the United States fail to file federal income taxes. Some miss filing required taxes for a year or two, while others may miss filing for several years at a time. In fact, there are even some individuals who owe back taxes from decades ago.
People fail to file required tax returns for a variety of reasons. For many, the reason is the lack of funds. Afraid the balances due on their tax returns will be too much to bear, many individuals choose to skip filing altogether. Some intend to file at a later date, while others hope to avoid filing and paying indefinitely. However, back taxes have a way of catching up to those who avoid paying, sooner or later.
Fortunately, owing back taxes doesn’t have to be end in criminal prosecution. By filing back taxes quickly and accurately, many individuals are able to minimize fines and penalties. Even if an individual owes taxes for several filing periods, most experts agree that filing late tax returns is far better than risking serious trouble by continuing to avoid them.
If you owe back taxes, you may want to seek the advice of a tax professional. A tax professional can help you assess your unique situation and determine the best strategy for dealing with the tax agency. A tax professional can also prepare your late returns for you, enabling you to get them in as quickly as possible. Furthermore, a skilled tax professional can negotiate with the involved tax agency on your behalf, perhaps even negotiating lower penalties.
If you are the do-it-yourself type, you can prepare your own returns. Just make sure you do your best to ensure the accuracy of your tax documents. There are many computer programs available that serve to make tax return preparation easy and fast. Keep in mind, however, that late federal tax returns must be filed on paper, not electronically.