If you’ve ever asked yourself, ‘How to know if I owe taxes?’, the easiest way to tell that you do is if you’ve received a notification from the IRS via mail.

There are also other ways in which you can confirm that you owe taxes, and these include calling the IRS to inquire about your taxes, checking your returns from the recently completed tax year, and logging into your online IRS account.

Key Takeaways

• If you are wondering, ‘How to know if I owe taxes’, the answer is: you usually receive a notice from the IRS by mail if you owe the federal or state government any taxes.
• There are also other ways to determine if you owe taxes, such as creating an IRS online account, reviewing your past returns, or contacting the IRS directly.
• You can pay off your tax bill and other existing tax debt through installment agreements or offers in compromise. The IRS can also delay the collection of your taxes temporarily.

How Do I Know If I Owe the IRS?

There are four main ways for you to know if you owe the IRS any taxes:

#1. Receiving a Notice by Mail

Receiving an IRS notice by mail is the primary way to know if you owe taxes. The IRS always sends important tax notifications and information through mail—not via phone call, text, or email.

Because of this, you must make sure that the personal details on your Form W-4 or Form W-9, such as your mailing address and contact information, are up-to-date. Otherwise, the IRS may end up sending your statutory notice to the wrong address.

You must also take the time to read and review the contents of the letter or notice in case the IRS has specific instructions and requirements for when you file your taxes.

#2. Logging Into Your IRS Online Account

The Internal Revenue Service highly encourages taxpayers to create an IRS online account to access their withholding tax information, payment history, and tax balances from previous tax years.

Creating an IRS online account and logging in to check your tax information will help you instantly answer your common tax-related queries, such as ‘How to know if I owe taxes?’ and ‘How much tax do I owe?’.

#3. Filing or Reviewing Past Tax Returns

Another effective way to know if you owe taxes years back or in the recently concluded tax year is to file and review your past tax returns. For instance, if you need to amend your returns from the recently concluded tax year, then you must seize that opportunity to go over your taxes.

This way, you can check the taxes you have paid in the previous year and assess whether you have duly fulfilled your tax obligations or still owe the IRS. Reviewing your past returns also gives you the chance to pinpoint any discrepancies in your tax information.

Consequently, you have a more accurate reference as to your unpaid tax balances, and you can also update your tax details accordingly.

#4. Contacting the IRS Directly by Phone

You can call the IRS’ toll-free service hotline at 800-829-1040 for any inquiries about your federal taxes or clarifications on the information on the W-2 form or 1099 form you received.

Taxpayers who know little about how the US tax system works often fall for the tax myth that the IRS will call you if you owe any taxes. If you receive a phone call from the IRS inquiring about your taxes, that is most likely a scammer attempting to steal your sensitive information.

What Happens If I Owe Back Taxes?

Here’s what might happen when you owe the IRS back taxes:

#1. The Accrual of Penalties and Interest

It is possible that you may have accrued penalties and interests because you either failed to pay or file your taxes on time or because you may have unsettled tax liabilities from the past tax years. In some cases, taxpayers who do not report all of their annual income are also predisposed to accumulating penalties.

If you did not file a tax return in the last tax year, you are subject to paying the failure to file penalty on top of the taxes that you still owe. The failure to file a penalty starts at 0.5% of the amount you owe.

The interest rate for your penalty will continue to increase at a capped rate of 25% until you settle your back taxes.

#2. IRS Actions: Liens and Levies

Consequently, there are specific courses of action, such as a Notice of Federal Tax Lien or tax levies, that the IRS may take depending on how much tax you owe.

Tax liens are legal claims imposed by the federal or state government on the properties or assets of a business or individual who fails to settle their tax liabilities.

Often, individuals and businesses who receive a notice of tax lien are those who continue to exhibit noncompliance with their outstanding tax notices.

The lien serves as a guarantee that the taxpayer pays their arrears or tax balances, wherein the government seizes their assets if they fail to fulfill the needed repayments.

On the other hand, when tax levies are imposed, the taxpayer’s properties are legally taken to fulfill the tax debt.

Options for Paying Off Your Tax Bill

If there are methods to know if you owe taxes, then there are also ways to pay off your tax bill, and these are:

#1. Installment Agreements

Using installment agreements to pay your tax bill means enrolling in an IRS installment payment plan. The payment plan serves as an agreement with the IRS that you are to pay your owed taxes within a specific and extended period.

The setup fees for an installment agreement will depend on whether you are applying as an individual or a business. You can establish your payment plan using Form 9465 Installment Agreement Request or the online Payment Agreement tool.

#2. Offers in Compromise

Offers in compromise means you can pay your tax debt at a much lower rate compared to the actual balance that you still owe.

This option is reserved only for specific circumstances, such as earning very little income to afford your tax liabilities or being in an unstable position financially. The application process and requirements for Offers in Compromise are explained in detail in Form 656-B, Offer in Compromise Booklet.

#3. Temporarily Delaying Collection

The IRS can also delay the collection of your tax debt if they determine that your current financial situation prevents you from repaying your existing liabilities. Take note that even if the IRS temporarily delays the collection of your debt, the applicable penalties and interests will continue to increase until such time that you are able to make the necessary payments.

You may be asked to provide proof of your financial status and fulfill either Form 433-F, Form 433-A, or Form 433-B.

Why You Should Address Tax Issues Promptly

Aside from determining how to know if you owe taxes, you must also assess your tax issues promptly. Doing so yields the following benefits:

Lower Penalties and Interests

The faster you resolve any issues or discrepancies on your tax returns, the lower the possible penalties and corresponding interest rates that you have to pay in addition to your existing tax balances.

Avoiding More Severe IRS Actions

Whether you filed your tax returns with incorrect or incomplete information or missed the deadline, you must inform the IRS about the issue or address your mistakes immediately.

Otherwise, the IRS could misinterpret the delays in resolving your tax issues as deliberate non-compliance with existing tax regulations and possibly charge heavier penalties.

Peace of Mind From Resolving Tax Issues

Understandably, taking responsibility for mistakes in your tax payments and returns can be scary, given that the IRS and the state government may have specific instructions for resolving a specific tax record discrepancy.

However, it is best to seek professional assistance and inform your state government or the IRS of your concerns to avoid further complications when you file taxes in the future.

Preventing Future Tax Liabilities

Being a responsible taxpayer means preventing future tax liabilities by knowing when taxes are due and understanding how to estimate your taxes correctly.

Here are additional ways to keep your tax obligations in check:

#1. Keep Accurate and Complete Tax Records

Keeping complete and accurate tax records comes in handy when you make mistakes when filing your returns or receive an audit notice from the IRS.

If you are an employer, you must ensure that your employee’s tax information, such as their declared dependents and filing status, is duly updated.

By doing so, you can withhold the correct income tax amount from their salaries, apply all suitable tax deductions, and confidently answer your staff if they want to know if they owe taxes to the IRS.

#2. Use Paystub.org

Paystub.org offers affordable and easy-to-use online generators that can make customized W-2 forms, 1099 forms, and pay stubs.

Whether you’re an employer, employee, or self-employed individual, using our W-2 form and 1099 form generators enables you to furnish the required tax forms and file your taxes on time.

Besides that, our paystub generator helps small business owners record their employees’ earnings, withholding taxes, and voluntary deductions accurately and consistently.

#3. Understand Withholding Adjustments

Some taxpayers raise the query, ‘How to know if I owe taxes to the IRS?’, without first taking time to learn how the IRS determines the amount of taxes to levy on their income.

Understanding withholding adjustments means knowing how the federal taxes you owe can increase depending on your tax bracket. It also entails knowing when to use a Form 1099 vs. a Form W-2 when reporting your annual income to the IRS and filing your taxes.

#4. Consult with Tax Professionals

Depending on your tax situation or the penalty that you want to resolve, consulting with a tax professional effectively reduces errors in your tax returns and helps you determine whether you qualify for possible tax refunds.

#5. Get Familiarized With Tax Regulations

Familiarizing yourself with the different tax regulations is crucial because it covers basic tax-related queries such as ‘When do you pay taxes?’ or ‘How to check if I owe state taxes?’

Employers and employees alike must also understand how certain payroll taxes, such as FUTA and SUTA, work to ensure they each pay the correct tax amounts. At the same time, state income tax rates differ per state.

Conclusion

Now that we’ve helped you answer the question, ‘How to know if I owe taxes?’, there is no excuse for you to remain clueless about your tax-paying responsibilities.

Not to mention, there are several government agencies, such as the Internal Revenue Service and the US General Services Administration, that offer accessible information and guides about taxes on their websites.

How to Know if I Owe Taxes FAQs

#1. How long can you owe the IRS?

You can typically owe the IRS taxes for up to 10 years, and that’s based on the Internal Revenue Service’s Collection Statute Expiration Date. The 10-year timeframe begins from the time your taxes, including any outstanding balance and existing penalties, were evaluated.

#2. How can I verify the accuracy of taxes I owe?

You can verify the accuracy of taxes that you owe by creating an online federal tax account through the IRS website, logging in, and viewing all the details about your taxes.

Once you’ve created an account, you have the option to request a transcript of your tax records, particularly your past tax returns and wage and income statements.

#3. What are the long-term impacts of unpaid taxes?

When you leave your taxes unpaid or unsettled for a long period, you can face late payment penalties ranging from 0.5% to 25% of your unpaid taxes. If you know that you owe taxes or have existing penalties and interests, it is best to address them as soon as possible.

Unless your failure to resolve your unpaid taxes is intentional, the IRS does not pursue criminal or civil charges against taxpayers who have not settled their tax bills.

#4. How do I check if I owe taxes without logging online?

If you want to confirm whether you owe taxes without logging into your online account, you can find the nearest IRS office or Taxpayer Assistance Center in your area, call 844-545-5640 to schedule an appointment and get in-person help.