BACK TAXES

When taxpayers are behind on paying their IRS tax debt they invariably begin paying on the oldest debt first.  That sounds logical to you, but to the IRS the most important tax that must be paid first is your current taxes.  Once you are caught up on your current taxes, THEN the IRS wants you to enter into a settlement to pay on the oldest tax debt.

Paying taxes currently in most cases is very hard for clients to do.  They have been living without paying taxes or at least the full amount and their standard of living has been elevated by the shortfall in taxes they should have been paying.  Then changes in your standard of living need to be adjusted downward so you can stay current on your current year’s tax liability.

If you are making the change in the amount you owe for estimated taxes or federal income tax withholding in January, the monthly amount of increase will be the lowest.  Making this same change in July, the monthly amount of increase would be double since you only have half as much time to make up for the shortfall.  If a client comes in late in the year and cannot possibly catch up on their current taxes, we will usually file the return, add that debt to the balance owed to the IRS and begin the new year by paying in the proper amount of estimated taxes or withholding in January.