It is possible to estimate how much you owe without getting in touch with Uncle Sam.
The process of knowing if you owe Uncle Sam back taxes is a factor of what the tax relates to – returns you file already or the ones you will file later. Whatever it may be, you can have a fairly accurate deduction of your debt in back tax without getting in touch with Uncle Sam. At some point, however, you might need to contact them for an exact amount before making payment.
Step 1: Get Copies of the tax returns which you still owe taxes on
The first step is to collate your entire tax return and documents that have to do with every year you owe the government some back taxes. All of these tax returns will report information on the tax amount you owe but haven't paid.
Also, if you filed a return but lost a copy, it is possible to get a copy from the tax accountant that prepared the document for you or request for a duplicate from Uncle Sam.
Step 2: File Your Past Tax Return that is due
For back taxes that have to do with returns yet to be filed, it is possible to estimate the tax amount owed for each year by actually preparing the return. When you eventually file the return, it is compulsory to use all tax forms for the previous year you are filing.
For instance, assuming in 2021, you want to prepare your 2018 tax return, then all schedules, forms and instructions you use must be 2018. Uncle Sam will likely notify you if you use any form for a specific tax year not related to the same tax year you are filing.
Laying your hands on these old tax forms is not as difficult as you might think. You are better off using tax preparation software, which will allow you access to the IRS tax form for former years. Also, it is possible to search for every form you need on Uncle Sam's website. However, if you require older forms, you will have to print them out before filling them manually.
Step 3: Estimate Your Penalties and Interest
Sadly, you cannot ignore penalties and interest charges which do not matter if you are preparing the tax return for the first time or the tax return was filed years ago. You will have to increase your tax bill by the interest and penalty charges imposed by Uncle Sam at the point of payment since you paid late. When you calculate the interest and penalties, you will get an accurate estimation of what you have to pay.
As an example, for someone that files their tax return about five months or more after the due date, it is essential to increase the payment by 25% of the tax owed.
Step 4: Pay the Back Taxes
After estimating what you owe Uncle Sam, you have the option of making the full payment immediately (the best option) or make a payment arrangement as soon as possible. Do not forget that your outstanding back taxes will keep accruing interest for every month that you default.
If you owe a significant amount and cannot pay it at once, you can work out a payment plan by contacting Uncle Sam. Once you set up an instalment plan, you can avoid strict and other harsh collection enforcement by Uncle Sam, provided you stand by the agreement and make payment when due.
FOR MORE INFORMATION ON HOW ROSOVICH & ASSOCIATES, INC. CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.
THANKS FOR VISITING.
Rosovich & Associates, Inc.