Get Current with Tax Filing & Payment

Many individuals and businesses that get behind on taxes often wonder how they can get current when they are trying to get caught up on back taxes. Our advice is to pay this year’s tax first, not back tax. The reasons for this are threefold. First, the IRS must allow you to get current. Secondly, to get any form of resolution and relief on back taxes, you must be current with paying your taxes in the current year. Thirdly, you can save hundreds, if not thousands of dollars, by focusing on this year’s taxes.

You see, for every year you don’t pay the current year’s taxes, you incur a whole new round of penalties, whereas the penalties for the old years are not going to get that much bigger. Keep in mind, the money you pay for back tax could have been used for current taxes, and the back tax may be eligible for a settlement or may be expiring soon. Another way to save on owing back taxes is to at least file your tax returns on time, even if you can’t pay. This will save you hundreds, if not thousands, of dollars with late filing penalties.

The vicious cycle of paying back tax at the expense of not paying current year tax can and needs to be broken. Lothamer knows all too well how you can accomplish this. If you’re in business, we can show you how to re-organize your business and pay your taxes throughout the year, not quarterly. The quarterly system is probably the worst system for paying your taxes: it’s not automatic, it’s quarterly, it’s after the fact, and it’s based upon an estimate most times using the prior year’s tax, meaning it’s far from accurate. If income goes up, the estimate is too low. If income drops, the estimate is too high or the business owner is unable to pay it.

We have proven methods for automating your taxes, and those methods are based on cash flow, not profit. Your taxes need to be paid monthly, not quarterly, and if based on cash flow, you don’t even need to wait for a prepared financial statement.

Most accounting firms are not equipped to prepare delinquent tax returns, nor desire to do so, and are not willing to make you a priority. In fact, most regular accounting firms will automatically prepare Married Filing Joint tax returns, when this election could prove to be fatal. Joint tax returns create 100% liability for each spouse for the total tax. The liability is joint and several. Also, the assets of both spouses are subject to levy and seizure by the IRS, making any settlement with IRS larger than what could be attained by filing Separate Returns.