How to Get Help With Back Taxes

When you owe federal or state taxes, it’s important to address the situation sooner rather than later. Waiting to get help with back taxes can leave you with more to repay if interest and penalties accrue. 

If you can’t pay your tax bill in full, there’s help—you could work with a tax relief company to get caught up or explore IRS tax help programs. We’ll walk you through the options so you can tackle your tax bill with confidence.

What are back taxes? 

Back taxes are unpaid taxes from previous years. The IRS encourages you to file your return by the annual deadline to avoid penalties. There are two penalties to know:

1. Failure to file penalty: Increases by 5% each month, maxing out at 25% of the unpaid tax.
2. Failure to pay penalty: Increases by 0.5% each month, up to 25% of the unpaid tax but often adds up slower than the failure to file penalty.

If you’re subject to both penalties, the IRS reduces your failure to file penalty by the amount of your failure to pay penalty. 

Assuming a starting debt of $10,000 in unpaid taxes, here’s an example of how IRS penalties for late filing and late payment can accumulate over time.

Month late	Failure to file penalty	Failure to pay penalty
1	$500	$50
2	$1,000	$100
3	$1,500	$150
4	$2,000	$200
5	$2,500	$250
Total	$2,500	$250

What happens if you owe back taxes?

If you file a tax return but don’t pay your bill in full, the IRS will send a written notice as the first step in the collection process. The notice includes:

• Amount of tax due
• Accrued interest and penalties
• Demand for payment in full

The IRS encourages taxpayers to pay back tax bills in full upon receiving notice. Penalties and interest continue piling up until the bill is paid. If you don’t pay, the IRS can move ahead with more severe collection actions, including:

• Wage garnishments
• Tax liens
• Tax refund offsets if you’re owed a refund
• Bank account levies

If the IRS places a lien against your property, a Notice of Federal Tax Lien can be put on your public record, which is accessible to creditors. Beyond the IRS, you may have your passport revoked by the U.S. State Department if your unpaid tax is deemed “seriously delinquent” by the IRS.

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How to pay back taxes 

There are several paths you might take to handle your back tax bill. The IRS offers these options. 

• Pay in full
• IRS payment plan
• Offer in Compromise
• Currently Not Collectible status

Pay in full

The first and most obvious choice for dealing with back taxes is to pay in full. This satisfies the debt and gets the IRS off your back. 

How it works

If you have the funds to cover your back taxes, you can pay the IRS using these methods:

• Online ACH or debit card payment
• Same-day wire transfer
• Check or money order (through the mail)
• Cash (through selected retail partners)

Once the IRS receives your payment your tax debt is satisfied. 

What to know

If you pay in full, consider where the money will come from. If you have it, you might pull from your savings, but if you don’t, you could use a personal loan to pay back taxes. 

Essentially, you’re swapping one debt for another, but you may be more comfortable owing money to a lender versus the IRS. 

IRS payment plans

The IRS offers payment plans that allow individual taxpayers and small business owners to pay back taxes over time. 

How it works

There are two payment plan options to choose from:

• Short-term payment plans are designed to let you pay off your tax bill in 180 days or less. 
• Installment agreements are long-term payment plans that allow you to pay off your balance in up to 72 months. 

You can set up a payment plan online, over the phone, or by mail using Form 9465, Installment Agreement Request. 

What to know

Long-term payment plans require a setup fee. Interest and penalties accrue until the balance is paid. 

Offer in Compromise

An Offer in Compromise (OIC) allows you to settle your IRS tax debt for less than what you owe. 

How it works

If you’re eligible for an OIC, the IRS agrees to forgive part of your tax debt. You’re eligible if you:

• Filed required tax returns and made required estimated tax payments
• Have not filed for bankruptcy
• Have a valid tax extension for the current year’s return

If the IRS accepts your offer, you can pay in a lump sum or periodic installments. 

What to know

Requesting an OIC doesn’t guarantee approval. The IRS approves offers on a case-by-case basis. 

Currently Not Collectible Status

Currently Not Collectible status means the IRS has determined that you can’t pay what you owe right now. 

How it works

If you get an IRS notice and can’t pay, you can call the phone number on your notice to request Currently Not Collectible status. The IRS may ask you to complete a Collection Information Statement and offer proof of a financial hardship. 

What to know

Currently Not Collectible status doesn’t erase your back tax debt—it just gives you more time to find a solution. 

How to file back taxes 

If you need to file a past-due return the first step is gathering your documents. That can include:

• W2s from your employers
• 1099 forms 
• Records for any expenses you plan to claim deductions or credits for

If you need wage or income information to file, the IRS can help. You can submit Form 4506-T, Request for Transcript of Tax Return, and check the box on line 8. 

Once you have everything you need to file you can fill out your return. You’ll need to use the tax return form for the year you want to file. 

If you’re using an online tax software program to file, the program should walk you through the options for filing back taxes. If you find the process confusing it might be worth having a tax pro handle your filing. 

When do back taxes expire?

The IRS has 10 years from the date tax was assessed to collect back taxes, as well as any interest or penalties due, from you. 

The IRS reserves the right to extend the collection window or suspend it. If that happens, they’ll have more time to try and collect. Your collection window could be longer if you:

• Request an installment agreement
• File for bankruptcy
• Request an Offer In Compromise
• Ask for a collection due process hearing

There’s no statute of limitations if the IRS suspects you committed fraud or tried to evade your tax bill. 

Tax relief options for back tax help 

Tax relief can give you some breathing room. Relief can be penalty abatement, professional help from a third-party company, or the IRS Fresh Start program. 

Penalty abatement

Penalty abatement gives you relief from failure to pay and/or failure to file penalties. You may qualify if you have a good tax history. You can request this even if you haven’t paid your tax bill in full. 

To request an abatement, call the number listed on your IRS notice. You can also submit a request by mail. 

Tax relief companies

Tax relief companies can help with the following:

• Abatement requests
• Filing delinquent returns
• Resolving collection actions
• Installment agreements or Offers In Compromise

You may prefer to work with a tax relief company if you don’t have time to submit letters or make phone calls to the IRS or just want the reassurance of professional guidance. 

If you’re considering a tax relief company, it’s important to choose a reputable provider. Review their qualifications and services offered, as well as the fees they charge. Check online reviews to see what past customers have to say, and look for a company that offers a free consultation so you can learn what they’re about before paying a fee. 

I recommend working with a professional if:

• Your back tax owed is a large sum—typically at least $10,000 – $15,000+.
• You have a complicated tax situation
• You are assessed for both federal and state income tax owed (hire a CPA licensed in your state)
• You don’t have the knowledge or time to educate yourself to handle the process on your own
• You need help with deciding which payment plan is best for your situation

Erin Kinkade, CFP®

IRS Fresh Start

The IRS Fresh Start program was introduced in 2011 to help taxpayers wipe the slate clean on their back tax debt. The program instituted some changes that would make it easier to manage tax debt, including: 

• Extended installment agreements
• Offers In Compromise
• Tax lien withdrawal for taxpayers who pay their balance in full using a debit card

While the Fresh Start name has faded, taxpayers can still pursue these options when they have tax bills to pay. 

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What if I can’t resolve my back taxes?

If you’ve tried everything and still can’t pay back taxes, you could consider bankruptcy. Filing bankruptcy can clear tax debt if you:

• Owe federal or state income tax debt that’s at least three years old
• Filed a tax return for the debt you want to discharge in bankruptcy 
• Didn’t willfully evade your tax debt or commit tax fraud
• Received a tax assessment at least 240 days before you filed for bankruptcy

Keep in mind that bankruptcy only erases tax debt, not tax liens. If you’re considering bankruptcy for back tax debt, you might want to talk to a bankruptcy attorney. They can walk you through the pros and cons and what to expect if you file.