Back Taxes Implications and What To Do

Back taxes is a term for taxes that were not completely paid when due. Typically, these are taxes that are owed from a previous year. Causes for back taxes include failure to pay taxes by the deadline, failure to correctly report one’s income, or neglecting to file a tax return altogether.

Most of this happen because of lack or incomplete recording in the books that it is hard for the tax accountant to get the information it needs to complete the filing of return.

What are the implications of this?

If back taxes are owed, the taxpayer’s debt will continue to increase with the inclusion of interest and tax penalties. Late payment penalties include 1/2 of 1% for each month the taxes remain due past the due date. If the taxpayer never filed taxes, there is also a significant late filing penalty.

You will also risk losing your refund and other benefits if you don’t file your return. If you are due a refund for withholding or estimated taxes, you must file your return to claim it within 3 years of the return due date. The same rule applies to a right to claim tax credits such as the Earned Income Credit.

What do you need to do?

First, consult with your tax accountant what needs to be done.

Second, look for someone to complete your books.
(Hint: We are an expert when it comes to accounting and bookkeeping.)

Lastly, act now. The longer you delay filing, the larger your interest and penalties will be!

Reminder to Taxpayers

File when ready, don’t wait until October 17 to file a 2021 tax return.

For people who requested an IRS extension to file, the October 17, 2022, deadline may seem far away, but it’s coming up fast.

Taxpayers who haven’t filed, whether they requested an extension or not, should file a complete and accurate return as soon as possible.

For people who have all their paperwork in hand, filing sooner and filing electronically could help them avoid possible processing delays later. 

And for those who have not done their books for 2021, we can help!

Do you need to file or send out 1099-NEC & 1099-MISC?

Dear Clients and Partners,

Just want to share with you some tax-related matters for your information, this is about 1099-NEC and 1099-MISC.

What are these forms?
Form 1099-MISC (Miscellaneous Information) or Form 1099-NEC (Nonemployee Compensation) to:

  • Report payments made of at least $600 in the course of a trade or business to a person who’s not an employee for services (Form 1099-NEC).

-simply put these are contractors, project-based or self-employed individuals

  • Report payments of $10 or more made in the course of a trade or business in gross royalties or payments of $600 or more made in the course of a trade or business in rents or for other specified purposes (Form 1099-MISC).

-examples are rent paid for the year and fees to attorneys

  • Report payment information to the IRS and the person or business that received the payment.

Note that these are for US-based contractors and payees only, if you are outsourcing from anywhere in the world other than the US then you don’t have to file or send out these forms.

Let us know if you have paid these kinds of payees, so that we can generate reports for you that you can use for your business or send to your accountant.

Deadlines for submission to IRS:

  • 1099-NEC, January 31 either by e-file or by mail
  • 1099-Misc, March 1 if filed by paper and March 31 if filed electronically

For your US-based employees, you need to fill out Form W-2 and submit to SSA, IRS and employees on or before January 31.
Hope this information will be helpful.  Thank you!

All the best,

IRS Key Filing Season Dates

There are several important dates taxpayers should keep in mind for this year’s filing season:

  • January 14: IRS Free File opens. Taxpayers can begin filing returns through IRS Free File partners; tax returns will be transmitted to the IRS starting January 24. Tax software companies also are accepting tax filings in advance.
  • January 18: Due date for tax year 2021 fourth quarter estimated tax payment.
  • January 24: IRS begins 2022 tax season. Individual 2021 tax returns begin being accepted and processing begins
  • January 28: Earned Income Tax Credit Awareness Day to raise awareness of valuable tax credits available to many people – including the option to use prior-year income to qualify.
  • April 18: Due date to file 2021 tax return or request extension and pay tax owed due to Emancipation Day holiday in Washington, D.C., even for those who live outside the area.
  • April 19: Due date to file 2021 tax return or request extension and pay tax owed for those who live in MA or ME due to Patriots’ Day holiday
  • October 17: Due date to file for those requesting an extension on their 2021 tax returns