Back Taxes Help in Honolulu, Hawaii

What Are Back Taxes?

Back taxes are taxes that were due in a prior year and haven’t been paid in full. They can come from a return you filed but couldn’t pay, a return you never filed, an audit or IRS adjustment, or business taxes like payroll tax or Hawaii General Excise (GE) tax that fell behind. Once a balance is assessed, penalties and interest keep adding to it until it is paid or resolved.

What Happens If You Ignore Back Taxes?

The problem gets bigger and the options get narrower. Here is what the IRS can do:

• Penalties. The failure-to-file penalty is 5% of the unpaid tax for each month a return is late, up to 25%. The failure-to-pay penalty is 0.5% per month, also up to 25%, and rises to 1% per month if the balance isn’t paid within 10 days of an IRS notice of intent to levy.
• Interest. The IRS charges interest on unpaid tax and on penalties, and by law it can’t remove interest unless the related penalty is removed or reduced.
• Federal tax liens. A lien is the government’s legal claim against your property, and a filed lien can affect your credit and your ability to sell or refinance.
• Levies and wage garnishment. The IRS can levy bank accounts, garnish wages, and take other assets. It can also keep your future tax refunds and apply them to the debt.
• Passport problems. If your federal tax debt is “seriously delinquent,” the IRS can certify it to the State Department, which can deny or revoke your passport.
• Returns filed for you. If you don’t file, the IRS can prepare a substitute return without the deductions and credits you might be entitled to, which often means a higher bill.

The IRS generally has 10 years from the date a tax is assessed to collect it. That’s a long time to have a lien, levies, and penalties hanging over you, so it pays to act early.

Back Tax Relief Options

There is no one-size-fits-all program. The right option depends on how much you owe, your income, your assets, and whether your returns are filed. These are the main paths we use:

File Your Unfiled Returns First

Almost every resolution starts here. The IRS and the State generally won’t approve a payment plan or settlement until required returns are filed. We prepare and file missing returns, replacing any IRS substitute returns with accurate ones.

Installment Agreements (IRS Payment Plans)

A payment plan lets you pay over time while stopping most enforced collection. For individuals who filed on time, the failure-to-pay penalty rate drops while an approved plan is in place. Learn more about installment agreements and partial pay installment agreements.

Offer in Compromise

An offer in compromise lets you settle your tax debt for less than the full amount when paying in full isn’t realistic. The IRS looks at your income, expenses, and asset equity, and many offers are not accepted, so we review eligibility before you apply.

Currently Not Collectible Status

If paying anything would leave you unable to cover basic living expenses, the IRS may place your account in currently not collectible status. Collection pauses, but the debt remains and penalties and interest continue.

Penalty Abatement

Penalties can make up a large share of back taxes. If you have a clean history or a reasonable cause such as illness or a disaster, penalty abatement may remove some or all of them, along with the interest on those penalties.

Levy and Garnishment Release

If the IRS has already levied your bank account or garnished your wages, we move quickly to request a levy or garnishment release and put a resolution in place.

Hawaii State Back Taxes, Including GE and TAT

Owing the State of Hawaii is a separate problem from owing the IRS, with separate rules. The Hawaii Department of Taxation (DOTAX) can garnish wages and levy bank accounts too. Common state back-tax problems we handle include:

• Unpaid Hawaii individual income tax
• Unpaid or unfiled General Excise (GE) tax, often from self-employed people and small businesses
• Unpaid Transient Accommodations Tax (TAT) from vacation rental owners
• Hawaii withholding tax owed by employers

DOTAX offers monthly payment plans and has its own offer in compromise program. DOTAX also considers penalty waivers for reasonable cause. As with the IRS, you generally need all required returns filed before DOTAX will agree to a resolution. We handle the IRS and the State together, so one agreement doesn’t undercut the other. See real examples on our case results page.

How We Resolve Back Taxes: Three Phases

We work in three phases: analysis, compliance, and resolution. Each phase has a flat fee, quoted up front before any work begins, with no hidden charges.

1. Analysis. We pull your IRS and State transcripts, confirm exactly what you owe and for which years, check your collection deadlines, and lay out your realistic options.
2. Compliance. We prepare and file any missing returns so you are eligible for relief, and we deal with the IRS and DOTAX for you in the meantime.
3. Resolution. We negotiate the agreement that fits your situation, whether that’s a payment plan, an offer in compromise, currently not collectible status, penalty relief, or a combination.

Do You Need a Tax Lawyer for Back Taxes?

Usually, no. Most back-tax cases are about filing returns, documenting your finances, and negotiating with the IRS and the State, not going to court. Enrolled Agents are licensed by the IRS and have unlimited practice rights to represent taxpayers before the IRS on any tax matter, the same as attorneys and CPAs. Back taxes and IRS collection are what we focus on. If your case does involve criminal exposure or litigation, we’ll tell you and point you to a tax attorney. See more on when you need a tax lawyer in Hawaii.

Back Taxes FAQs

What should I do first if I owe back taxes?

File any unfiled returns and find out exactly what you owe. Pulling your IRS and Hawaii transcripts shows the balance, the years involved, and the collection deadlines, which decides which relief options are open to you.

Can the IRS forgive back taxes?

Sometimes, partly. An offer in compromise can settle tax debt for less than the full amount if you can’t realistically pay it, and penalty abatement can remove penalties. The tax itself is rarely forgiven outright, and offers are approved only when your finances support them.

How long can the IRS collect back taxes?

Generally 10 years from the date the tax is assessed. Some events, such as a pending offer in compromise or bankruptcy, can pause that clock.

Can I go to jail for owing back taxes?

Not for being unable to pay. Owing taxes you can’t pay is a civil collection matter. Criminal cases involve willful evasion or fraud, which is rare. Filing your returns and addressing the debt is the best protection.

Will the IRS take my passport for back taxes?

It can if your federal tax debt is “seriously delinquent.” The IRS can certify the debt to the State Department, which can deny or revoke a passport. Debts in an approved payment plan, an accepted offer, or currently not collectible status are not certified.

How do I get help with Hawaii state back taxes?

You can request a payment plan through Hawaii Tax Online, or have a representative negotiate with the Department of Taxation for you. We handle Hawaii income, GE, and TAT back taxes along with any IRS balance.

How much does back tax help cost?

We work in three phases (analysis, compliance, and resolution), and each phase has a flat fee quoted up front before any work begins. The first step is a free 30-minute consultation.

Do I need a tax lawyer to deal with back taxes?

Usually not. Enrolled Agents are licensed by the IRS to represent taxpayers in collection matters, payment plans, and offers in compromise. A tax attorney is mainly needed for criminal exposure or tax litigation.

Get Help With Your Back Taxes Today

The sooner you act, the more options you have. Meet with our Enrolled Agents, Steven Montgomery, EA and Gorden Gates, EA, at our office at 1001 Bishop St, Suite 960, in Bishop Square, downtown Honolulu, or by phone or video (Zoom) from anywhere in Hawaii.