Owe back taxes to the IRS?
There are many situations that can put you behind in paying your federal income taxes.
An unexpected major health
issue could suck up all your savings and
put you on the verge of bankruptcy. Maybe you lost a job and are not back on your
Or you are self-employed, business has been slow and you are behind in sending quarterly estimated federal tax payments to the Internal Revenue Service.
Whatever the circumstances of "getting in trouble" with the IRS, you need to deal with it. These circumstances all require a tax return.
If you ignore the issue, it only gets worse because "back taxes" and late payment penalties pile up.
"People need to start the dialogue as soon as possible," David Tucker, IRS spokesman in Seattle, told me. "Let the IRS know that you have an intent to pay. We will work with that individual to resolve the situation. When there's no communication...that's the problem."
He recommends that if you face a complex tax situation, hire a tax professional who can walk you through the process of sorting out and catching-up. A tax pro can tell you what documentation you will need before meeting with the IRS and what you will need to claim certain tax-deductible expenses.
"From the standpoint of the IRS, we want the (tax-paying) process to be as easy as possible," Tucker said. "If you haven't paid taxes for a number of years, we want to work with you. Think of it as a collaboration rather than an adversarial situation. But don't ignore IRS notices that may be coming in the mail. Call us," he said.
Doing the research
If you think you are in tax trouble, make an online visit to IRS.gov. Read up on the IRS "Offer in Compromise" tax debt program that may allow you to settle your tax debt for less than the full amount you owe. This is about as painless as it can get if you owe back taxes.
Meanwhile, if you are in a low-income bracket, you may think you don't need to file a federal tax return. Reconsider because you might be leaving money on the table.
"People should look at filing a return regardless of whether they owe any taxes," Tucker said. "They should go through the process to see if they qualify for a refundable credit or other tax credits."
For example, the Earned Income Tax Credit, applies to individuals (and couples) who work but don't earn much. The average EITC "refund" is $2,400.
As well, you may qualify for a Child Tax Credit or the American Opportunity Tax Credit, which provides incentives for going to college.
Who must file? Just about everyone. Tucker explained that as a single taxpayer under age 65, you must file a return if your gross income (in 2017) is at least $10,350. If you are 65 or older, you must file if your gross income is $11,900 or more.
Julia Anderson writes for women about money at sixtyandsingle.com. Her Smart Money show with Joe Smith appears on Beaverton-based TVCTV.