Hugo D. Regardless of your reason for having back taxes, you can take some steps to improve your situation. For example, you can file a substitute return, reduce your tax liability, or file a tax lien.
Reducing Your Tax Liability
Having professional tax help you reduce your tax liability is a great way to save money on your taxes. Tax professionals can help you get every credit or deduction you’re eligible for. They will also ensure that you’re paying the correct amount of tax.
There are several ways to reduce your tax liability, including deductions and paying taxes on time. Some people need to learn that they have deductions available to them. Contact a certified accountant if you’re wondering how to reduce your tax liability.
If you’re a part-year resident, you will have to prorate the standard deduction based on the number of months you lived in the state. You can also deduct certain business expenses from your gross income.
You can also reduce your tax liability by contributing to a retirement account. The IRS does not tax direct contributions to 401(k)s. In 2021, you can contribute up to $19,500 or $6,500 if you’re 50 or older.
Filing a Past-Due Tax Return
Having missed the filing deadline for your tax return isn’t a good thing. The IRS will take severe collection actions against you. You may even be subject to jail time. Luckily, there are several things you can do to avoid being audited or worse.
First, you can file a past-due tax return. Then, you can file your return online using the IRS’s free program. You can also file your return with your accountant or tax professional. They can provide you with a form to fill out and print. You can also use tax preparation software to prepare your return.
When filing a past-due tax return, you must provide the IRS with the following information: your full name, date of birth, social security number, filing status, income, and other information. You will also need to provide receipts for tax deductions.
You can claim a refund if you are eligible for it. The IRS will let you know if you qualify. Your refund will be deposited into your checking account if you are eligible.
Filing a Substitute Return For You
Getting a substitute return from the IRS is not a good idea. It can result in larger tax debt, and you will not get any credit for your deductions. It is best to file your original tax return on time.
The IRS has a huge backlog of unfiled tax returns. The IRS may file a substitute return for you when filing late. The IRS may also send you a statutory notice of deficiency. This notice informs you of the taxes you owe and gives you 90 days to file your past-due return. If you do not file, the IRS will begin collections actions. These actions include garnishing your wages, levying your bank accounts, and filing federal tax liens on your property.
You can get a refund by filing your original tax return on time. This allows you to take advantage of your tax credits and entitlements. In addition, filing your original tax return allows you to take advantage of the best write-offs.
Filing a Tax Lien
Having a tax lien can affect your business’s credit and financial dealings. Consider consulting with a tax attorney to learn more about your state’s laws.
There are two basic types of tax liens. First, the IRS may place a lien on your real or intellectual property. Alternatively, the IRS may place a lien on your bank accounts.
When a tax lien is filed against a business, it will generally be placed in the county where the executive offices are. If a business owner doubts the lien’s validity, they should contact the IRS. The IRS will take a look at the history of the account. They will also make sure the business owner does not owe back taxes. If the business owner does owe back taxes, they may file for an installment agreement with the IRS. This may put the collections on hold.
If the business owner does not pay the taxes, the IRS can take action against the business. This can result in the business shutting down. It can also affect current accounts receivable.
Avoid Getting a Tax Refund
Getting a tax refund can be a huge boost to your wallet. But, if you need to file your taxes properly, you could be in for nasty surprises. Luckily, there are ways to avoid getting a tax refund while paying your back taxes.
The best way to avoid getting a tax refund is to be proactive about your taxes. To do this, you’ll want to ensure that your filing status is correct and that your social security number is up-to-date. If you need more clarification, it’s always a good idea to check with your tax preparer for additional advice.
If you need a tax refund, avoid getting a refund anticipation loan. These come with hefty fees and will likely result in you owing money to the government. Instead, it would help if you looked into cheaper options, such as direct depositing your refund into a savings account.
