Tax problems won’t go away if you ignore them. The longer you delay, the more penalties, interest and stress build up until the situation feels impossible to handle. A step-by-step guide can help you fix the tax issue you’ve been putting off. Working with the best tax firm to resolve back taxes can also give you the expertise and structure you need to end the cycle once and for all.
8 Tax Mistakes You Might Be Making
Tax mistakes are more common than you might think. Here are eight mistakes that can cause you stress, money and maybe even legal trouble.
1. Ignoring Small Income Streams
Even small revenue streams — like Venmo payments from tutoring your neighbor’s kid and tips from dog walking — form part of your income. Even if you don’t get a 1099 form in the mail, you’re still legally responsible for reporting it. Ignoring these small amounts may not feel like a big deal now, but those "harmless" side hustles can lead to penalties and interest. Not reporting these small amounts can also increase your chances of being audited.
2. Mixing Personal and Business Expenses
Treating your personal life like a business write-off is one of the quickest ways to raise red flags in an audit. Keep your finances separate without any exceptions. This protects you, your credibility and your deductions.
3. Failing to Track Deductions Properly
Too many taxpayers throw away money by not documenting deductible expenses. You need proof for all charitable contributions, medical bills, mileage and home office costs. Without receipts or a log, the deduction doesn’t exist in the eyes of the IRS.
4. Withholding the Wrong Amount
If you haven’t updated your W-4 in years, you’re probably withholding the wrong amount. Life changes — like marriage, divorce, kids or multiple jobs — make old withholding information irrelevant. Get it wrong and you might owe a large bill or give the government an interest-free loan.
5. Missing Estimated Payments
If you’re self-employed, a freelancer or a gig worker, you must pay quarterly estimated taxes. Skipping them guarantees penalties and interest. Waiting until April to catch up is a financial hit you could avoid with a little discipline throughout the year.
6. Forgetting State and Local Taxes
Federal taxes aren’t the only ones you need to pay attention to. Many people overlook what their state, city or county requires, especially if they move or work across state lines. These missed obligations accumulate fast, and state tax authorities will come after what you owe.
7. Filing Late or Not at All
Delaying your return doesn’t make the problem disappear. Late filing fees and interest start accruing immediately. Even worse, not filing at all can lead to wage garnishments, liens or forced collections. Ensure you file your returns on time, even if you can’t pay in full.
8. Not Asking for Help
Thinking you can figure it out alone is one of the most expensive mistakes you can make. Tax law is complex and errors are costly. A qualified professional can spot deductions you missed, fix mistakes before they become liabilities and protect you in case of an audit.
How to Fix the Problem
If you’ve been putting off dealing with your taxes, it’s time to take direct, deliberate action. These steps can help you stay consistent and regain control.
Know When to Bring in a Professional
There are limits to what you can do alone. If you have multiple unfiled years, business entities with payroll or sales tax issues, foreign accounts, or you’re already under audit or collections, you need a professional. Come prepared with your organized records, spreadsheets and a clear timeline of your situation. The more prepared you are, the less you’ll pay in fines and the faster you’ll see results.
What Is the Best Tax Firm To Resolve Back Taxes?
Polston Tax has built a strong reputation for guiding individuals and businesses through stressful tax situations and is widely regarded as one of the best tax firms to resolve back taxes. More than 80 professionals work together, including tax attorneys, CPAs, enrolled agents, accountants and financial analysts. With over 100 years of combined experience, the Polston team has the depth of knowledge to handle even the most complicated tax problems.
From the moment you begin working with Polston, case managers and legal professionals support you throughout the entire process. They can handle everything from filing submitted returns to representing you in audits, negotiating settlements or arranging installment agreements. The company focuses on creating a strategy that prevents future tax problems, rather than just solving the immediate issue.
Many see Polston as the best firm to resolve back taxes because of the comprehensive way it addresses every part of a tax case. Clients often describe the experience as life-changing. With the firm’s guidance, what once felt unmanageable becomes structured and achievable.
Stop the Issue
The first step is to stop making the problem worse. That means separating your finances immediately. If you earn money from freelance work, side hustles or business activities, open a dedicated bank account for every dollar of income and related expenses.
If you’re an employee with a paycheck, log in to your payroll system and update your withholding so money is set aside correctly. If you know you’re behind on this year’s taxes, immediately make an estimated payment to the IRS. Even a partial payment reduces the interest and penalties that grow daily.
Create a dedicated folder on your computer labeled for taxes and begin moving every document — including income forms, receipts and bank statements — into it. The goal is to prevent new mistakes from stacking up on top of old ones.
Inventory the Situation
You can’t fix what you haven’t defined. Make a list of each tax year, starting with the oldest one that may be incomplete and moving forward through the current year. For each year, identify whether you filed a return, still owe money, or received notices from the IRS or state authorities.
Gather all the paperwork for those years, such as prior tax returns, wage and income statements, 1099s, bank records, and credit card statements. Save them digitally in folders by year so nothing gets misplaced. This step may feel overwhelming, but once you see everything laid out, the problem becomes finite and solvable.
Reconstruct Income and Deductions
If you failed to file or keep poor records, you must reconstruct what happened. Start with your income by pulling bank records, payment processor reports, invoices and platform dashboards to calculate your total earnings for each year. Next, rebuild your deductible expenses. Use receipts, bank transactions, mileage logs and calendars to support what you spent for business or other deductible categories.
If you’re missing receipts, make notes of how you calculated the numbers and label them clearly as reconstructed. The IRS allows reasonable reconstruction when records are incomplete, but the key is to be consistent and thorough. Keep everything in a master spreadsheet so you can see the totals by year.
File All Unfiled Returns
Once you have your numbers, the next step is to file the missing returns before the IRS reaches out, which may result in better treatment. Always start with the most recent year, because it stops new penalties from compounding. Even if you can’t pay what you owe, filing the return is critical, since the failure-to-file penalty is more severe than the failure-to-pay penalty.
File electronically whenever possible for faster processing. If you must mail your return, use a trackable delivery service and keep proof of mailing. Always save a complete copy of the filed return in your records. Filing the return establishes a clear record with the IRS and stops the problem from becoming worse.
Amend Incorrect Returns
If you’ve filed in the past but know those returns were wrong, it’s better to correct them now before the IRS discovers the mistake. Prepare an amended return for each affected year. Attach any new schedules or corrected forms and briefly explain what changed. Be factual and straightforward.
Once submitted, keep track of the amended filings in a separate folder so you can confirm when they’re processed. By amending proactively, you demonstrate good faith, which can reduce penalties and strengthen your case if you ever face an audit.
Tackle Balances Due
The next challenge is paying what you owe. Start by making a good-faith payment right away – even if it’s small — to lower the accruing interest. Then decide on your payment approach. If you can pay in full, do it and close out the balance. If not, apply for an installment plan with the IRS. These plans allow you to pay over time, but it’s essential that you don’t miss a single payment once the plan is approved.
If your financial situation is extreme, you may qualify for a temporary hardship delay or an offer in compromise, but both require documentation. What matters most is that you’re addressing the debt instead of avoiding it.
Request Penalty Relief Where Justified
The IRS has programs that allow for penalty relief, but you must request them. If your compliance history is clean, you may qualify for first-time penalty abatement, which wipes away certain penalties.
If you face unusual circumstances, like serious illness, natural disaster or unavoidable loss of records, you can request penalty relief for reasonable cause. In these cases, you must provide dates, facts and documentation to support your claim. Always keep copies of your request and any approval letters.
Fix This Year’s Withholding and Estimated Payments
Once you’ve addressed the past, make sure you don’t repeat the mistakes going forward. Use your current income records to calculate what you’ll owe for this year. Update your W-4 with your employer to adjust your withholding. If you’re self-employed, schedule your quarterly estimated tax payments. Don’t wait until the end of the year. Each missed quarter triggers penalties, so it's better to pay in smaller chunks as you go.
Add the deadlines to your calendar and set reminders. Doing this will ensure that you are never blindsided by a large tax bill again.
Build a Simple Bookkeeping System
Taxes become a nightmare when records are scattered or incomplete. The solution is a simple, consistent system. Keep one bank account for business income and expenses, and transfer a percentage of every deposit to a tax savings account the same day funds arrive. Record your income and expenses at least once per month in a spreadsheet or basic accounting software and attach receipts to each entry.
At the end of every month, reconcile your records with your bank and credit card statements to ensure accuracy. This small routine will save you countless hours and protect you in the event of an audit.
Audit-Proof Your Life
Don’t assume the IRS will take your word for anything. Keep a tax binder for each year. Divide it into four sections — returns, income proof, expense proof and correspondence. Save mileage logs, charitable acknowledgments, payroll records, contracts and any communication with tax authorities.
Organized documentation is your best defense in an audit. If you can pull out a clean, complete file that matches your return, the audit process ends quickly and often in your favor.
Lock in Prevention
Once the immediate crisis is resolved, prevention becomes the priority. Save a fixed percentage of every dollar you earn in your tax account before you spend anything else. Review your withholding or estimated payments after every major life change, including marriage, divorce, children, a new job or additional income streams.
At the start of each month, do a five-minute compliance check using your calendar and bookkeeping system. By making prevention part of your routine, you prevent the problem from snowballing again.
Address the Problem
Fixing back taxes is possible when you commit to taking action. From organizing records and filing overdue returns to setting up payment arrangements and building better systems for the future, every step you take moves you closer to financial stability and peace of mind. Whether you choose to handle the process on your own or partner with the best tax firm to resolve back taxes, the key is to start addressing the issue.
