Robert J. Fedor, Esq., L.L.C.

Dealing with tax delinquency, IRS penalties and back taxes

It's been just about one month since the deadline to file 2013 state and federal tax returns came and went. Individuals and small business owners, who failed to file or pay their taxes, may believe they are in the clear and that the Internal Revenue Service won't discover they didn't file or pay their taxes. This assumption, however, is wrong and, when it comes to the IRS, it’s important to remember that no news isn't necessarily good news.

The IRS has a complex and sophisticated method of reviewing tax-related documents and discovering when a taxpayer has made mistakes. And yes, the IRS will eventually identify those individuals and small business owners who failed to file and pay their taxes and will take steps to aggressively pursue payment. In fact, during the last two years alone, the IRS targeted delinquent tax payers in an attempt to recover some $30 billion in back taxes and interest and penalty payments.

In this blog post, we'll provide practical advice and steps taxpayers can take to remedy delinquent taxes and avoid additional penalties as well as possible criminal tax crimes charges. The first step to getting back on track with the IRS is to file a delinquent tax return or returns for those years one failed to do so. Filing a delinquent tax return is important even if an individual can't immediately pay towards tax debt as the penalties associated with failure to file are more punitive that with failure to pay.

After a delinquent tax return has been filed, it's important to take steps to pay at least a portion of a delinquent tax bill. In cases where an individual's financial situation is dire, it's a good idea to contact the IRS who may be willing to work with an individual to negotiate payment amounts or terms. In cases where an individual cannot pay in full, but may be able to secure a low interest loan, it may be wise to do so provided interest payments are less than IRS fines and penalties.

Individuals who fail to take action to address and remedy delinquent tax debt may face criminal charges. Ohio residents who are facing criminal charges related to back taxes or delinquent tax debt would be wise to seek the advice and assistance of an attorney who handles criminal tax matters.

Source: Bloomberg Businessweek, "What to Do If You Forgot to Pay Taxes," Karen E. Klein, May 5, 2014

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