Each year, countless Americans ask themselves, “Do I owe the IRS?” The answer to this question is in the forefront of most people’s minds right before they sit down to file their taxes. However, for those who owe back tax payments to the IRS, the question soon becomes “How much do I owe, and how will I pay it?” The following is a guide to determining whether a tax payment is owed (and how much). This process consists of ensuring that all previous year tax returns are filed, and contacting the IRS to find out the balance owed, if any.
Step 1: Contact the IRS to if a Back Tax Payment is Owed
Either call the IRS (1-800-829-1040), or visit a local office. Calling is the fastest way to reach a representative about whether a tax payment is due. The hours are from 7 a.m. to 10 p.m. for each time zone in the U.S.
Whether calling or visiting a local IRS office, be sure to have the personal information for each of the taxpayers. The representative will ask for the taxpayer’s social security number in order to look up the records. For joint filers, always give the first social security number listed on the tax documents.
The representative will be able to provide information about any balance owed, including the specific years for which it is owed. Be aware that payment plans are available, both by phone and in person. However, it is best not to commit to any payment plans the first time inquiring about the balance. Waiting before committing to an IRS installment agreement provides the taxpayer with time to research the best approach. The only exception is if a small amount (less than $1000) is owed. Since it wouldn’t be economical to obtain a tax attorney for such a small balance, a payment agreement can be made with few consequences on future negotiations. For large balances, the taxpayer should consider consulting a tax attorney for advice.
Step 2: Prepare Tax Documents for Current and Previous Years
Either consult a tax professional to prepare the returns for the current and previous years, or follow the instructions to complete the form independently. Be aware that the IRS will help people to prepare their tax returns for free at local tax assistance centers. Remember to account for all of the income made during the tax year on the return. Failure to do so could result in delays processing the return, as well as fines and penalties.
If after crunching the numbers, the taxpayer doesn’t owe a back tax payment for the current or previous years, there’s nothing more to do until next year. Simply file the returns. However, if it is determined that a payment is due for current or previous years, follow the instructions under Step 3 below before filing the tax returns.
Step 3: Decide on How to Make the Back Tax Payment
How to approach the issue of back taxes owed to the IRS depends significantly on the amount owed. For amounts under $1000, consider either paying the amount in full, or committing to an IRS installment agreement. As of 2010, $55 is the minimum monthly payment for installment agreements. Be aware that this amount could be greater depending on factors such as the amount owed, ability to pay, and the discretion of the individual IRS representative.
When large amounts of money are owed in back taxes, it’s always best to consult a professional tax attorney. They can guide the taxpayer on the best way to approach the issue with the least negative consequences on the taxpayer. The tax attorney can also negotiate on the taxpayer’s behalf in order to reach a reduced settlement amount.
Regardless of the circumstances, never avoid answering the question, “Do I owe the IRS.” Failure to address tax problems can cause them to spiral out of control. If ever in doubt about how to determine the next step for those who owe back tax payments, seek professional assistance. It is well worth the money in the end!
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Sources:
US Internal Revenue Service (accessed 3/9/2010)
Cheri Pearson - Cheri Pearson is a seasoned freelance journalist who holds a Bachelor's degree in Business Administration from the University of ...
