Past Year Tax Problems Can Come Back to Haunt You

Even if you haven’t been nominated for a cabinet position, your past year tax issues can be a big problem later on.

For many people, there’s a rush to finish taxes as April 15th approaches, followed by the realization that there just won’t be enough time to file. Some manage to file an extension, and some pay a few days late, but for other people, the IRS issue recedes into the distance. It’s easier to just forget about the whole thing — and it gets easier every time a day passes without an angry letter from the IRS.

But those past year tax issues won’t go away, for a variety of reasons:

• The IRS will investigate when they have information about someone who hasn’t paid some of the taxes they appear to owe. It can take a while (right after April 15th, they’re pretty busy, but during the rest of the year, they have lots of time).
• The IRS also hires private investigators to go after tax returns that they might still be able to extract some money from. Unlike the IRS, private tax collectors are unlikely to negotiate, and they might use harsher tactics to get the money. As your past year tax liability grows, they have a larger and larger incentive to get it from you.
• In the end, it all comes out, as several politicians have recently discovered. Over time, people usually forget about mistakes. But as more and more information gets digitized, uploaded, scanned, and spidered, your past year tax owed on previous income will get harder and harder to hide.

Unfortunately, past year tax problems are just not going to go away. The IRS is focusing more and more on how to get extra revenue from existing taxes, and collecting more past year tax money is one simple way to do that. The best plan at this point is to pay the past year tax owed sooner, rather than later: the IRS can negotiate a past year tax settlement that costs less, but they prefer to do that with people who approach them about it.

Will past year tax issues get the better of you? It’s not likely. In most cases, the hardest part is the start: once you’ve decided to pay, started getting your records, done your research online, and gotten in touch with the IRS through a tax preparation company, you’re on your way.

Photo via Luz Adriana Villa A. on Flickr.

This entry was posted on Wednesday, May 15th, 2013 at 9:00 pm and is filed under Taxes for Prior Years. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.