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Back Taxes and How to Avoid Them

Man holding phone calculating back taxes on computer

What are back taxes?

Back taxes are federal, state, or local taxes that have not been paid in the year that they were due. A taxpayer may be behind in paying taxes for intentional or unintentional reasons like failing to report all income earned during the tax year.

These fees accumulate interest and penalties and must be paid back in a timely manner. If the taxpayer does not file a tax return, the penalty is 0.5 percent of the amount due. This penalty is applied every month until the tax is paid in full or the penalty reaches 25 percent. If the taxes are not paid, serious legal action can take place such as tax liens, property seizure, wage garnishing, or prison time.

How do you avoid them?

Withholding enough tax or making quarterly estimated tax payments during the year can help you avoid back taxes when filing during tax season. Taxes should be paid as you receive income, not at the end of the year. To avoid penalties when you file your return, pay at least 90 percent of your taxes during the year.

Changes in your life such as marriage or running a side business without withholding can affect the taxes you owe. Use the IRS Tax Withholding Estimator tool to see how much you may owe at the end of the year based on your income.

If you are expected to owe more than you are withholding, you can make estimated payments every quarter on the following schedule:

  • Due April 15: January 1 to March 31 tax payments
  • Due June 15: April 1 to May 31 tax payments
  • Due September 15: June 1 to August 31 tax payments
  • Due January 15 of the following year: September 1 to December 31 tax payments

To make these payments, visit IRS.gov/payments or send payments with Form 1040-ES.

Need help preparing your taxes? Our tax preparation and representation services ensure you do not stand alone when dealing with the IRS. We have the broad knowledge and experience that comes from providing accounting and tax planning services year-round.

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