Definition of Back Taxes
What are back taxes? What is the definition of the term back taxes?
"Back taxes" are taxes that are overdue.
For instance, let's say that you completely forgot to file your income tax return last year for some strange reason. You finally get around to filing your return, and the government says that you owe them $5,000 in taxes. Considering that these taxes are long overdue, they would qualify as "back taxes".
Back taxes can result from honest mistakes, fraud or scrutiny from your country's taxation department.
Maybe you forgot to report the income on a very small consulting contract that you had. This is an honest mistake that would result in some back taxes once you re-file your return.
Maybe you deliberately reported less income than what you actually made. This would be fraud, and once the Tax Man caught up with you, you would likely owe significant penalties and face possible jail time.
Maybe you are audited and it is determined that you are not able to write off a certain expense. This would result in some back taxes + penalties as well.
Back taxes are unpleasant because they are almost always made larger by penalties.
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