Expert Interview: IRS Help with Back Taxes

Phil Liberatore

Are you faced with a penalty for not paying your taxes or need some advice on dealing with the IRS for your tax problems? IRS Problem Solvers' Founder and Director Philip L. Liberatore, CPA explains how the IRS can help those who have failed to pay their taxes and gives tips on what taxpayers should be aware of when the time comes to file their yearly returns in this informative LoveToKnow interview.

Interview with Philip L. Liberatore, CPA

LoveToKnow (LTK): Why did you start the website IRS Problem Solvers?

Phil Liberatore (PL): I started this website to provide hope for so many people that feel hopeless when searching for a reputable company to resolve their tax situation. On our website our clients share their real life testimonies and success stories. Our website also makes it easier for people with IRS tax problems to find the help they need to get their life back as IRS problems do not go away by themselves.

LTK: Can you tell us some of the reasons that taxpayers fail to file their taxes?

PL: Many people fail to file tax returns for a variety of reasons. Some reasons are innocent, although the most common is the understandable desire of people not to pay tax if they can get away with it. We have heard many reasons why people fall behind; they may be seriously ill or unable to pay their tax liability.

LTK: What is the punishment for failing to file taxes?

PL: There are numerous penalties for failing to file your taxes. The Late Payment Penalty is 0.5% of unpaid balance for each month with a maximum penalty of 25%. If the IRS hits you with the Fraudulent Fail to File Penalty, the penalty is replaced with 15% of tax per month; not to exceed 75%. However, if you are due a refund, there are generally no penalties or interest assessed.

LTK: Does the IRS offer help for paying back taxes?

PL: The IRS is not completely heartless. They often let you get on an installment agreement if you owe current or back taxes. However, if you owe more than $25,000, be prepared to provide detailed financials. The IRS also considers Offers in Compromise but there are strict guidelines for qualifying and filing for this. If you truly cannot afford to pay the IRS a penny according to their assessment, there is the Uncollectible Status which they will put you in and re-assess yearly.

LTK: If you file late, will you still be able to receive a refund?

PL: Yes! The statute to claim prior year refunds is three years from the date the tax return was supposed to be filed (April 15) or two years from the date the tax was paid, whichever is later. For instance, April 15, 2010 was the last day that you could file for a refund from tax year 2007.

Tax Filing Tips

LTK: What are some important tips to keep in mind when filing taxes?

PL: Check Social Security numbers and last names carefully and make sure that they match your social security card. Both of these items are cross-referenced with the Social Security Administration. These numbers are extremely important and it's very easy to accidentally make a mistake. An incorrect name or number may face delays in receiving their refund.

When filing a paper copy of your tax return, make sure everything is legible. If the IRS cannot understand it, there may be problems.

Make sure to sign the tax returns. If it's a joint return, both parties need to sign even if the form only lists income made by one person.

If you're nearing midnight on April 15 but you're not quite done with your tax return, file for an extension. It gives you a few months (or days) more to file. However, the payment deadline will not change even if the extension is granted. Simply put, the extension is an extension of time to file; not an extension of time to pay.

Tax Deductions

LTK: Can you tell us about some of the most common tax deductions?

PL: A tax deduction is not a direct deduction in your tax liability, but a reduction of your taxable income. Common deductions for those who itemize their deduction on Schedule A include:

  • Mortgage interest
  • Property taxes
  • State income taxes paid
  • Charitable contributions
  • Medical expenses

Some other common deductions available whether or not you itemize include contributions to retirement accounts (most commonly Traditional IRA's) as contributions to Health Savings Accounts. Capital losses are a great way to lower your taxable income. These occur when an investment results in a loss after the property/security/equity/asset is sold. Capital losses can only be deducted annually up to $3,000 but losses in excess of that can be carried forward in perpetuity. Paying alimony? Yep! It's a deduction!

Taxpayer Advice

LTK: Do you recommend filing your own taxes or getting a professional to file for you?

PL: I highly recommend hiring a professional to file your taxes for you. We have spent many years doing this, have spent many hours yearly in seminars on specific items, and have studied the ins and outs for years. A good tax professional will delve into your tax life and see what, if anything might be able to apply to you. Oftentimes, there are credits or deductions you wouldn't even have thought of!

LTK: What advice can you give taxpayers who are late in filing their return?

PL: If taxes are not filed by the deadline and there are taxes due, taxpayers maybe subject to interest charges even if an extension was filed. Taxpayers should file their taxes and pay their taxes due as soon as possible to avoid paying penalties and interest.

Expert Help

If you find yourself faced with tax problems, don't wait until its too late. There are experts, such as IRS Problem Solvers, who can give you advice to help you avoid or reduce the penalties that can incur when you do not file your taxes. If you are faced with back taxes, the IRS may be able to offer you an installment plan to pay them back. Tax experts will be able to guide you in the right direction and can give you the advice you need to keep you on track with your payments as well as to keep you organized when filing your annual taxes.

Expert Interview: IRS Help with Back Taxes