First, What Are Back Taxes?Back taxes are “taxes that have been partially or fully unpaid in the year that they were due. Taxpayers can have unpaid back taxes at the federal, state and/or local levels. Back taxes accumulate interest and penalties on a regular basis.”
Understanding Back TaxesBack taxes refer to taxes owed from a prior year. A taxpayer may be behind in paying taxes for intentional or unintentional reasons. Some of these reasons include:
- Filing a return and failing to pay the tax liability
- Failing to report all income earned during the tax year
- Neglecting to file a tax return
What Happens if a Taxpayer Doesn’t Pay Back Taxes?Unpaid back taxes can be a serious issue for many taxpayers who don’t have the means to pay them. If a taxpayer does not pay back taxes they owe, they can face a range of consequences from the government. Some strategies the government may use to get a taxpayer to pay back taxes include:
- Pressing charges
- Demanding the taxpayer pay immediately
- Offer a voluntary disclosure program (to help avoid criminal charges)
- Offer payment options
- Seizing property
- Seizing assets
- Placing liens on the property
- Placing a federal tax lien to inform other creditors of the taxing authority’s legal right to a taxpayer’s assets and property.
- Garnishing a taxpayer’s wages and to levy their financial accounts, seizing up to the total amount of taxes owed.