Unpaid Taxes: Useful Resources to Resolve IRS & State Liabilities

unpaid taxes

Do you have unpaid taxes with the IRS or State? Worried you won’t be able to pay your next tax bill? Luckily, there are lots of options to help you pay off your taxes. To understand how the IRS works, check out the following links. Remember, many states have similar resolution frameworks.

How Do You End Up Owing Taxes?

Generally, people pay their taxes during the year through payroll deductions or by making estimated tax payments. However, if you don't have enough money deducted or prepaid, you may end up owing taxes. You can also owe taxes on your return if you made a mistake, had to report unusual income, or in several other situations. To avoid another unexpected tax bill in the future, you should figure out why you owe taxes on this year's return and take steps to prevent that from happening next year.

Options If You Can’t Pay Your Taxes

The IRS realizes there are situations where it’s hard to pay your taxes. To help, the agency has created a range of different options. Beyond the IRS-sanctioned options, there are a variety of other alternatives. Ultimately, it’s important to explore all the options and figure out what’s best for your situation.


Penalties, Interest, and Other Consequences of Unpaid Taxes

If you file your tax return late or don’t pay your taxes, the IRS assesses penalties and interest. In addition, if you fail to make payment arrangements, you may face serious collection activity including asset seizure or wage garnishment.

The Failure to Pay Tax Penalty

If you don’t pay your taxes or if you underpay, the IRS charges the failure-to-pay penalty. The penalty ranges between 0.25% and 1% of your balance every month. This link above explains the charges and looks at how to remove failure-to-pay penalties.

Loss of Tax Refund

If you have unpaid taxes, the IRS will keep your tax refund. This is called a refund offset. If you live in a state with income tax, the state revenue agency can seize your state refund for unpaid state taxes, but if you don't owe state taxes, the IRS will take that refund as well. Of course, the reverse is also true -- the state can seize your IRS refund for unpaid state taxes (unless the IRS claims it first). This is just one of the many refund-related tax issues that can happen. 

How to Find Out How Much You Owe the IRS

If you aren’t sure how much you owe the IRS, you can check online, over the phone, or through the mail. The most reliable option is to use the phone or the IRS’s online tool. When you receive IRS notices in the mail, your balance may not reflect all interest and penalties.

General Overview of Tax Options by Tax Owed Amount

If you owe back taxes, your options vary depending on how much you owe. There are different resolution options and different implications to owing at different tax owed levels. Generally, the IRS views taxes owed in the following categories: less than $10,000, $10,000 to $50,000, and over $50,000. Here are details on what to expect in each situation.

IRS Statute of Limitations for Collection

This refers to how long the IRS has to legally collect taxes owed. After the statute of limitations (SOL) expires, the IRS cannot take you to court over old taxes. Usually, it is ten years from the assessment date, but many things can extend or toll the statute. There is also a different statute of limitations on unfiled tax returns. Read up on some actions that toll or extend the SOL using the link above to understand more.

Getting a Mortgage When You Owe Back Taxes

Unpaid taxes can make it hard to get a mortgage. Some lenders aren't willing to work with people who have unpaid taxes. Others will consider mortgage approval as long as you're on a payment plan for your back taxes. Check out this resource to learn how unpaid taxes and tax liens can affect your ability to get a mortgage.

What if My Spouse Owes Back Taxes?

When your spouse has back taxes owed to the IRS or state taxation authorities, you may be equally liable for those taxes owed. There are many factors in determining your liability depending upon when your spouse incurred the tax liability, your filing status, and other factors. This guide will help you understand the consequences of your spouse's unpaid tax liabilities. 

Answers to When a Deceased Person Owes Taxes

When a family member, friend or loved one passes away, it can be emotionally difficult. What happens when a person dies and owes taxes? How, when and by whom do these taxes get paid? Do taxes need to be field? What happens if they get audited? Get answers to the aforementioned questions and more. 

Delinquent Taxes

Check out our guide to the definition of delinquent taxes. Learn what constitutes delinquent tax from the Internal Revenue Service or any other taxing agency. Figure out if you have delinquent taxes and learn how to get help. 

FAQs About Unpaid Federal Income Taxes

Frequently asked questions and answers about unpaid taxes. Review the penalties and what actions the IRS can take, and get tips on how to resolve your tax issues.

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific advice regarding your tax situation, contact a licensed tax professional or tax attorney.

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