We’ve all heard about someone who’s run into trouble with back taxes, and we know that it’s not a situation we want to be in. To avoid falling into that scenario, it’s important to understand what back taxes are, how they work, and how to avoid them.
Fortunately, the team at our Sacramento area tax relief company has the insight you need on back taxes.
What Are They?
Back taxes are, quite simply, taxes that you owe from previous years. This can include taxes you owe from a tax return you filed, taxes the IRS finds you owe from past tax returns during an audit, or taxes from returns you failed to file at all. While back taxes from unfiled returns or undeclared income tend to be the most serious–this can equate to tax evasion, depending on your circumstances–back taxes are always serious and should be addressed right away.
Do Back Taxes Go Away?
The short answer here is no, back taxes don’t just go away. Generally speaking, an IRS goes back through three years of returns or, in some circumstances, up to six years. Under extenuating circumstances, though, the IRS may choose to audit even further back.
Regardless of how far back an audit extends, though, back taxes don’t simply so away after a certain amount of time. Once the IRS notifies you of a debt, it remains until you pay it off or make arrangements that bring you to good standing with the IRS. If you owe back taxes, don’t ignore them! Instead, let our tax debt relief experts near Sacramento help you get back into the IRS’ good graces.
Do Back Taxes Affect Your Credit Score?
Just about any major purchase involves a credit check, and your credit score can impact your ability to get a loan, mortgage a home, buy a vehicle, or make just about any other major financial move. A major component in your credit score is your credit-to-debt ratio.
The taxes you owe on a return won’t impact your credit score right away like most debt, though. If you fail to pay in a timely manner, however, it can certainly impact your score. If your debt exceeds a certain threshold, the IRS can issue a Notice of Federal Tax Lien which can tarnish your credit score.
If you know that you owe back taxes, or if you haven’t filed your taxes from previous years, being proactive is the best way to protect yourself, your credit score, and your assets. Contact the Paramount Tax Relief team by calling (916) 533-9940 today to schedule a consultation and start working on a solution to your back tax problem. We’re here to help!