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I Owe Back Taxes. Will That Affect My Tax Return This Year?

We can just about guarantee that if you haven’t already been thinking about your taxes, you are now. But here’s the thing. Truth be told, this time of year can be really complicated for people with substantial tax debt, back taxes, and who have recently been audited.

From national tax commercials to social media, you’ve probably been inundated with plenty of reminders that the tax deadline is right around the corner. While we always advocate for filing sooner rather than later, with just over one month until Tax Day, at this point there’s not much “later” even available.

Tax Season can be incredibly confusing, and a lot of people have questions that aren’t readily answered unless they talk to an expert like us. We help people file taxes, but what you may know us best for is our tax relief and tax audit services. We know tax code in and out, backward and forward, and we’re always ready to help out a new client.

With that in mind, we thought we’d try to answer some of those confusing Tax Season questions we get asked all the time by folks dealing with tax debt or other tough IRS-related circumstances.

So let’s dive in and take a look at what tax season looks like for people with tax debt or who are dealing with an audit. You’d be surprised how easy some of these answers might be!

1. You Owe the IRS Money

If you owe back taxes, are in the process of negotiating your debt with the IRS, or are currently repaying your debt to the IRS, you should be aware of a few things when tax season rolls around.

Do you need to file taxes? Yes. Your tax debt will never affect whether or not you need to file. You should still plan on filing your taxes every year, whether or not you owe the IRS.

Can you still file for an extension? Yes. Negotiating your tax debt for past years doesn’t affect your filing this year, so if you need extra time to finalize the details on your tax return, you can still file for an extension. Huge reminder here: Filing for an extension doesn’t mean you get more time to pay your taxes for this year. They’re still due on Tax Day.

Will you still get a refund? Probably not. If you’ve already locked down an installment agreement or payment plan and are currently making payments for a different tax period, the IRS is pretty direct. One of the conditions of your agreement is that the IRS will automatically apply any refund toward the taxes you owe. Oh, and be aware that this total won’t be applied to your monthly payment. You’ll still need to pay that in full.

2. You’re Dealing with an IRS Audit

What if you’re being audited, or were contacted by the IRS last year? In this case, you won’t see too much change to your filing this year. But you should still keep a few things in mind.

 Do you need to file taxes? Absolutely. Just like tax debt doesn’t affect whether or not you need to file taxes, the same rule applies to audits. It’s a good rule of thumb: Always plan on filing.

Can you still file for an extension? Yes! As always, though, this extension only applies to filing your taxes—not paying them. So if you owe the IRS any money, you can save yourself some hassle and penalties by paying on time.

Will your refund be affected? Depends. Most audits are triggered because certain elements of your tax return seem abnormal when compared to otherwise similar tax returns. However, even a well-defended audit can still result in you owing money. Whether you choose to pay that in a lump sum or in installments, your refund is always on the line.

The Best Tax Strategy Is Having a Tax Team

 Each person’s relationship with the IRS is unique, just like each person’s financial situation is unique, too. Whether or not you’re dealing with the IRS, defending an audit, repaying your debt, negotiating an installment plan, or simply filing your taxes, the first and best tool you can have at your disposal is knowledge.

The best strategy for gaining the confidence to deal with the IRS is never to go it alone. A competent team of tax experts can not only help file error-free taxes and boost your tax refund, but it can also help cut down your tax debt, successfully defend audits, and improve your overall confidence—in and out of tax season.

And there’s truly no feeling better than that.

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