HomeBlogBack Taxes (Explained: All You Need To Know)

Back Taxes (Explained: All You Need To Know)

What does Back Taxes mean?

How do you define Back Taxes in simple terms?

What should you know?

Keep reading as I have gathered exactly the information that you need!

Let me explain to you the meaning of “back taxes” and why it’s important!

Are you ready?

Let’s get started!

What Are Back Taxes

The term back taxes refer to taxes that a taxpayer has not paid and payable to the tax authorities.

In other words, when you owe taxes to the federal government, state governments, or any other local government authorities, you have “back taxes”.

Typically, back taxes (or unpaid taxes or overdue taxes) are subject to penalties and interest from the moment they were due to the date they are settled.

Tax authorities have important collection powers that allow them to collect back taxes that a taxpayer may owe.

Particularly, governments can take legal action to collect back taxes, they can register a lien against your assets and property, they can garnish your wages, or in extreme cases send you to jail!

If you have back taxes, to avoid adverse consequences, it’s best that you get in touch with the IRS to find a mutually agreeable way to settle your taxes.

Back Taxes Definition

How do you define back taxes?

Back Taxes Example

In many cases, an individual may end up having back taxes as they did not have enough money withheld from their salary to pay for their taxes.

For example, Mary earns a salary of $50,000 per year.

Imagine that she has $300 withheld on each of her paychecks through her employer.

At the end of the year, her employer will have withheld $7,800 in taxes to remit to the government (26 paychecks X $300).

However, imagine that Mary has a total of $10,000 taxes to pay based on her salary of $50,000.

In this case, Mary would owe $2,200 extra to the government at the end of the year. 

If Mary did not save enough money to pay for that extra tax liability, she would end up missing the due date thereby defaulting on her tax liability.

In that case, the $2,200 will become back taxes.

Takeaways 

So there you have it folks!

What are back taxes in simple terms?

Let’s look at a summary of our findings.

Back Taxes Meaning

  • The term back taxes refer to taxes that have not been fully paid and remain payable to the tax authorities 
  • To say “back taxes” is like saying that “my taxes are backed up” or “unpaid”
  • When an individual or company has unpaid taxes (back tax), the government can take various legal measures to ensure the collection of the sums unpaid
  • In addition to broad collection capabilities, governments will also charge interest on the tax money that was unpaid and levy various penalties 
Asset-backed securities
Automatic lien 
Back bond
Back office 
Back pay 
Back rent
Back taxes owed
Federal back taxes 
Levy 
Lien 
Mortgage-backed securities 
Offer in compromise 
Tax break 
Tax delinquency 
Tax liability 
Tax lien 
Tax refund 
Tax returns
Tax settlement 
Tax withholding 
Unpaid back taxes 
Unpaid taxes
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