Back taxes or otherwise known as tax debt are taxes that are left unpaid, therefore become past due and assessed against a taxpayer either by the Federal, State or Local government. Specifically, The IRS are federal income taxes and are assessed one of three ways.
The first way is typically from a filed income tax return that has been left unpaid. Simply put a taxpayer filed an income tax return, but never paid the amount due by the deadline, usually due by April 15. Once the IRS processes the return and takes a look at the owed amount left unpaid, it now becomes back taxes owed to the IRS with penalty charges being added to the original amount.
The second way can be assessed against a taxpayer that has filed and paid their tax return, but has failed to disclose all the income that was earned for the previous year. The IRS receives records from all financial institutions and employers that show all that persons income for that particular year. It is when they do not match what the taxpayer filed on his/her tax return, that it becomes an issue. If the taxpayer does not resolve this promptly, the IRS can amend the taxpayers already filed return and assess back taxes now owed to the IRS.
The third way to assess back taxes is when a taxpayer does not file a tax return at all. The IRS will then file a return on behalf of the taxpayer (usually not in the taxpayer’s favor) called Substitute for Returns. Once the IRS has assessed the tax and it is not paid by the taxpayer, it now becomes back taxes.
The IRS has ten years to collect back taxes from the date of assessment despite which way the back taxes were assessed. The CSED (Collection Statute Expiration Date) is the date the IRS has to collect any given year’s past due taxes for any particular taxpayer.
It is always in your best interest to consult with a tax professional to clearly see all of your options to resolve your back taxes due to the IRS.