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It’s easy to get behind on your taxes but the consequences are drastic. Back taxes also become incredibly expensive once interest and applicable penalties cause your balance with the IRS to snowball. Because taking care of back taxes is daunting, taxpayers put it off and it only worsens the problem–and how much is owed.

In 2019, the IRS was due $121 million from tax returns filed with taxes owed. This dramatically halved to $60 million for the 2020 tax year as millions of Americans took massive hits to their incomes in the wake of COVID-19. But while the tax gap (measure of tax compliance and collection) has vastly narrowed in recent years, the Biden administration plans to ramp up collections enforcement and taxpayers with significant back taxes may find themselves at risk.

Table of Contents

What are Back Taxes?

When the taxes due from prior year tax returns and/or additional assessments from the IRS start to accumulate and go unpaid, this is referred to as back taxes.

Back taxes are often resultant of not filing your tax returns when they were due, and being harshly assessed by the IRS with the substitute returns they filed on your behalf. However, not all people who owe taxes neglected to file their tax returns. Back taxes can accumulate from corrections made to tax returns you filed, or were due at the time of filing but you could not pay them and did not make an effort to pay them over time.

How to File Back Taxes

Regardless of how much you owe, the most important step you need to take in mitigating your back taxes is to file any tax returns that have not yet been filed. This reduces your risk of an audit and also ensures that you are being fairly and correctly assessed based on your filing status and all relevant credits and deductions.

First, you need to gather all of your documents for the tax years in question. W-2 forms from your job, 1099s, and other relevant financial statements if you have your own business, and any other information that is needed to file your past due tax returns should be sorted and kept in one place.

If you have only one past due tax return, you may qualify for a one-time penalty abatement so you should request this from the IRS after you file.

Next, if you owe a significant amount of back taxes, you should file for an installment agreement or explore your other options if you cannot pay the total amount due on your account.

How to Pay Back Taxes

If you are able to pay your back taxes in full, you can make a one-time payment through the IRS website or by mailing a check or money order to the correct address for your location.

If you need more time to pay in full, there are options. You should try to pay down whatever you can, to prevent interest from accruing further or future collection actions. For the remaining balance, arranging an installment plan is often the next best course of action. If you think you can pay down the entire balance within 120 days and owe less than $100,000, you can go on a short-term payment plan. 

However, if you anticipate needing more time and owe $50,000 or less, you can arrange a long-term payment plan. The short-term payment plan is free to arrange, but long-term plans have setup fees that are reduced or waived if you are low-income.

If you owe more than $10,000 and are unable to pay, you can also consider an offer in compromise, which settles your back taxes for less than what you actually owe. Tax Shark can assist you with the offer in compromise process and help you explore your other back tax settlement options.

And if you are still exploring your options and unsure which one is best for you, you can also request that the IRS make your account currently not collectible if paying your balance would cause financial hardship. This will halt any collection efforts by the IRS as you take the time to determine whether an offer in compromise or installment agreement is the best course of action for your back taxes.

Can I File Back Taxes Online?

Yes, you can file back taxes online. You can file your past due tax returns using tax software and create an online payment agreement, as well as pay all or part of your balance due using IRS EasyPay, EFTPS, or credit cards.

You can view your online account with the IRS at any time to see how much you owe, with balance details for each tax year, plus payment history and scheduled payments. If you already have a payment plan, you can also see the details of that plan.

What Happens If I Don’t Take Action on My Back Taxes?

While handling your back taxes is a stressful prospect that causes many people to put it off, you should not put off your back taxes perpetually. If you don’t take any action to at least make arrangements for your back taxes, even if you can’t pay them, the following can occur.

Tax Lien

A lien can be put against your bank accounts, retirement accounts, real estate, and other assets. A lien doesn’t immediately seize your property, but it notifies creditors that the government has the right to seize it first.

Wage Garnishment

The IRS has the authority to garnish your wages if you owe a significant amount of back taxes and do not make any effort to pay them or choose a payment arrangement. Your wages may be garnished until the debt has been satisfied, making it difficult or impossible to pay your living expenses.

Bank Levy

The next step in the lien process, a levy against your bank account is the actual seizure of your money if you went too long without paying your back taxes or making any arrangements.

Property Seizure

Bank accounts are the first choice for the IRS, but they can also seize other financial assets like investment and retirement accounts, as well as real estate and even business property.

Passport Seizure

If your balance due exceeds $54,000 as of 2021 (adjusted for inflation annually), the State Department has the authority to seize your passport and make it impossible to leave the United States. The tax debt must be “seriously delinquent”, meaning that it has gone unpaid long enough for the federal tax lien process to commence.

Need Help Filing Back Taxes?

If you need help organizing and filing your back taxes, Tax Shark is here to help you. Our experienced tax professionals can get your taxes back on track and prevent your account from becoming delinquent, and help you determine the best way to resolve your back tax matters.

Feel free to give us a call at (866) 763-7775 to speak with a specialist.


How many years can you file back taxes?

In order for your account to be in good standing, you need to have filed the past six years’ worth of backdated tax returns. If you were obligated to file tax returns for those years, you should file them.

How long does the IRS have to collect back taxes?

Generally, there is a 10-year statute of limitations on collections. This means that the IRS can attempt to collect your unpaid taxes for up to 10 years from the date in which they were assessed (not the date in which you realized you owed taxes). It is very rare that a taxpayer ever rides out the full statute of limitations.

Is back taxes bankruptcy worth it?

Ultimately, this depends on your overall financial situation and how much your total debts exceed your assets, as well as your propensity for future income.

Bankruptcy proceedings provide relief to millions of Americans who’ve fallen on hard times with a chance to completely reset their finances. However, it is not without risks. It can be difficult to obtain housing and rebuild your credit if you file for bankruptcy. 

Since there are more options for long-term payment and settlement of federal tax debt compared to other types of debt, you may not need to file for bankruptcy simply because you have a large amount of back taxes.