What to Do if You Owe Back Taxes
December 19, 2022
Review These Critical Steps to Take
Paying taxes is a fact of life, but when the amount is excessive, you may not have the funds to pay in full. Making a mistake on your taxes can be costly as well, and if you plug in the wrong numbers, the IRS will surely come calling.
Whether you owe money to the IRS due to an innocent oversight, a lack of funds, or something else, ignoring the problem will not make it go away. Once you owe money to the IRS, the clock is ticking, and all the while penalties and compounded interest will be piling up. So, what should you do if you owe back taxes? Here are some critical steps to take.
Assess the Situation
Until you know how deep the hole is, you will not be able to start digging your way out. Before you do anything else, you should assess the situation, going through your old tax returns, reviewing communications from the IRS, and adding up what you owe the tax agency.
Once you have assessed the situation, you will be in a better position to make concrete plans. If you owe a lot of money, you may not be able to pay it off all at once, but with the help of a tax relief professional, you may be able to come up with a suitable repayment plan or you may be able to settle for less than you owe.
Review Your Budget
Owing money to the IRS is no fun, but you will have to resolve this one way or another. Hopefully, you can work out a more favorable payment plan with the IRS, one that might allow you to pay a reduced amount, but that will depend on your income, your allowable expenses, and your assets, if any.
It is important to review your monthly household budget carefully if you owe back taxes to the IRS. Every dollar you can pay back is one less dollar you will owe interest on, so think about where you can cut back and how you might be able to free up some cash.
Talk to a Tax-Relief Expert
The bad news is that you owe back taxes to the IRS. The good news is you may be able to settle the entire amount, including penalties and interest, for a fraction of what’s owed through the IRS’s offer in compromise program.
If you qualify for one of those programs, you may be able to settle your debt for less than you owe, but this is not something to tackle on your own. Work with a tax-relief expert, both to identify the proper programs and to make negotiating with the tax agency easier and more effective.
You can use the budget you reviewed earlier to identify sources of income and resources you have access to. Once that information is presented, the tax-relief expert can help you find a suitable tax compromise plan that just might save you a lot of money.
Take Care of the Problem Sooner Rather Than Later
Time is of the essence when you owe money to the IRS. Once those back taxes are assessed, the clock is ticking, and every day that passes will mean higher penalties, and compounding interest.
If you want to put your tax debt behind you once and for all, you will want to act fast. The sooner you start working on your tax resolution plan, the sooner you can take your financial life back.
To help ease the stress from your situation, we offer a free, no-obligation consultation with one of our tax resolution experts. You don't have to worry about confidentiality or cost because the consultation is free with zero gimmicks or commitments. Schedule an appointment with one of our tax resolution specialists today by clicking on this link.
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Tax season started in late January, but the IRS’s latest statistics show that many Americans are still waiting to file their taxes. As of February 7, 7.7% fewer tax returns have been received by the agency compared to a similar time frame last year, according to its latest data release. While the IRS expects filing numbers to even out, the IRS.gov website has experienced a 40% decline in visits this year to date over last year. Francine Lipman, CPA, a tax law professor at the University of Nevada, Las Vegas, says the reasons could be endless but probably come down to simple procrastination. “Despite all the Super Bowl ads, I don’t believe that tax issues are on people’s radar yet,” adds Lipman. This is surprising considering the political climate, says Jordan Rippy, an accounting professor at Johns Hopkins University’s Carey Business School, who expected to see an uptick in returns filed this year. “Given the general climate surrounding the new administration, I would have expected more anxiety in the general population and a desire to receive refunds more quickly,” she tells Fortune. Elon Musk’s Department of Government Efficiency (DOGE) reportedly visited the IRS on Thursday to begin analyzing the agency’s operations. Senator Ron Wyden (D-OR), ranking member of the Senate Finance Committee, later posted on X that “if your refund is delayed, they could very well be the reason.” Average tax refunds are higher this year so far The rise in electronic filing is one of the biggest changes to the tax system in the last decade. With over 90% of individual taxpayers now filing their returns online, the process has become easier to handle for many Americans. But taxpayers still miss out on over $7 billion in underclaimed and unclaimed tax credits and deductions each year. In the 2025 tax season to date, tax filers have received a 18.6% increase in their average refund amount ($2,065) compared to this time last year ($1,741). The IRS cautions this isn’t a perfect indicator of the final trend in tax refunds, since it’s early in the season. The agency says most refunds are issued within 21 days. In the final analysis, the average refund last year was around $3,138. Compared to 10 years prior, last year’s average rebate was down nearly 30% on an inflation-adjusted basis. Rippy says she is surprised that average tax refunds have not decreased more as Americans realize they can adjust their withholdings and get more money per paycheck throughout the year. “If you receive a large tax refund, what you've essentially done is given a loan to the government over the last year that you didn't have to give them, and you've done that interest-free,” says Rippy. At the same time, she admits that the fact that many Americans expect a big refund year after year is a good thing, as it’s a form of forced savings. While many end up saving their refund, others use it to pay down debt, make a home improvement, or go on vacation. Need help filing your taxes or having issues with the IRS? Receive your free consultation from Advantage Tax Relief today! https://www.advantagetaxrelief.net/request-form or by calling (630) 773-3200.
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