If you’re feeling anxious about your unpaid taxes piling up, then take a deep breath. Many Naperville residents, especially contractors, small business owners and self-employed professionals, also find themselves behind on taxes at some point.
Life happens. But before you know it, a few months of missed tax payments can turn into years of overdue notices which can lead to penalties and interests. The good news is that there are financially manageable ways to resolve this.
Step 1: Identify which taxes you owe
You can’t solve a problem you don’t fully understand. Start resolving your overdue tax obligations by getting a complete picture of your tax debt. This means knowing exactly how much you owe and to whom you owe it.
First, you have your federal taxes which you owe the Internal Revenue Service (IRS). Then you also have state taxes which you owe the Illinois Department of Revenue. Additionally, some Naperville business owners also owe local taxes. These are business fees that you pay your city to stay in good legal standing.
Write down the tax type, how much you owe and when you’re due. This list then becomes your roadmap for resolving your overdue taxes and penalties.
Step 2: Understanding your penalties
Tax penalties can add up quickly. Even more so when they are long overdue. Thus, you need to understand which penalties you’re being charged with and how much they can go up to. Here are some examples of tax penalties that you can get charged with:
- Failure to file
- Failure to pay
- Failure to deposit
- Accuracy-related penalties
- Dishonored checks
- Information return
- Underpayment of tax
- Excessive refund claims
- Other tax misconducts
You can find the type of penalty you’ve incurred in your tax notices. It should also indicate how much interest you’ve accrued and how they were calculated. Hence, it’s important that you keep a record of your tax notices.
Step 3: Set up a payment plan
Settling your overdue tax obligations can be a huge financial challenge. But you don’t need to pay everything off all at once. Both the IRS and the Illinois Department of Revenue offer installment agreements that give you more time and options to pay.
Think of these installment agreements as something similar to a pay later program. You can set up a payment plan with the IRS or your state revenue department for how you want to settle your debt. This way you can spread out your tax payments across smaller monthly installments. Hence, larger tax bills become less scary and more manageable for your budget.
Getting on top of your tax obligations
Overdue taxes and penalties don’t resolve themselves. At some point, you’ll have to stop the tax notices from piling up and dig yourself out of debt. Not settling your overdue tax obligations only grows worse with time but you have options to move forward with confidence.
While you can handle some aspects of tax resolution on your own, some Naperville contractors and business owners find that working with professionals who know the system saves them time, money and stress.
Whether you choose to take on this challenge alone or with professional help, what matters is that you start moving forward today.