Back Taxes

What are back taxes?

Back taxes are taxes from past years that remain unpaid. These are typically income taxes owed to the federal or state government that weren’t settled when due, either because a return wasn’t filed or the balance wasn’t paid.

Why do back taxes happen?

You might owe back taxes due to:

• Filing a return but not paying the full amount owed.
• Not reporting all income earned during the year.
• Failing to file a tax return entirely.

This can happen unintentionally, such as underestimating withholdings, or intentionally, like underreporting income. Either way, the debt remains until addressed.

The risks of ignoring back taxes

Unpaid back taxes grow over time with added costs:

• Failure to File Penalty: 5% of the unpaid tax per month, up to 25%, plus interest. The IRS may file a substitute return for you, excluding credits or deductions you’re entitled to.
• Failure to Pay Penalty: 0.5% per month on the unpaid balance, plus interest.

If the debt persists, the IRS can take further steps, such as garnishing wages, levying bank accounts, or placing a lien on your property. Filing a return on time, even without payment, avoids the steeper failure-to-file penalty.

Options for dealing with back taxes

There are options to address back taxes, depending on your situation:

• Negotiate a payment planAn IRS installment agreement lets you pay over time. Terms vary based on the amount owed and your finances, requiring an application and possibly setup fees.
• Request a short-term extensionYou can ask for up to 180 days to pay in full. No fee applies, but interest and a 0.5% monthly penalty accrue on the balance.
• Apply for a hardship optionOptions like an Offer in Compromise or Currently Not Collectible status may reduce or pause collection if you prove financial hardship. This involves detailed forms and IRS review.
• Partner with a tax professional (recommended)CoreTax can manage the process for you. We file returns, negotiate with the IRS, and seek the best resolution, whether it’s a payment plan, settlement, or penalty reduction, based on your circumstances.

Last updated October 15, 2026.