When it comes to paying taxes on time, men and women are not equal. That’s right — one gender is more likely to owe back taxes than the other.
If you guessed men as the gender most likely to hear from the IRS, you are correct.
More than one quarter — 28% — of men owe back taxes to the IRS, according to a recent GOBankingRates survey. In comparison, only about 19% of women are in this predicament. Here’s what experts say may explain the gender difference, and what people can do if they owe back taxes.
Why Do People Owe Back Taxes?
Many people who owe back taxes are business owners, said Armine Alajian, CPA, founder of the Alajian Group. She said that may help explain why men are more likely to owe back taxes.
“I don’t necessarily think it’s because men make more money than women do overall, that they more often owe back taxes,” Alajian said. “But I think the gender difference might be in part due to the fact that there happen to be more male self-employed people and entrepreneurs, than there are women.”
Ajajian said that when most new clients who are self-employed first come to her firm and learn that they owe back taxes, they’re surprised to hear that.
“They respond ‘I didn’t know,'” she said.
In this case, she said failing to pay their taxes is an accident.
“If you’re the person running the business, you have a lot of things to keep an eye on, and taxes are just one,” she said. “They might be more concerned about just running the business and treat taxes as an afterthought.”
She said there’s also a lot of different taxes for business owners to deal with, including sales tax, federal tax, city tax and personal property tax.
“It’s not surprising that a busy business owner might overlook some things or not have time to study up on all of the tax codes,” she said. “For example, learning what an S-Corp is and what you have to file for that.”
Possible Reasons Why Men Are More Likely To Owe Back Taxes
Beyond that, she said there are some household tasks that women are more likely to handle that men are more likely not to notice.
“The gender difference in taxes might parallel that,” she said. “However, I don’t really see this as a male/female-based difference, but more of a personality difference between creative people and technical people.”
She used her own family as an example.
“When I was growing up, my dad was more technical and he did all of the taxes,” she said. “I’m a woman, and I’m also more on the technical side, and I’m an accountant, so naturally I do our taxes.”
Dr. Lei Han, CPA, associate professor of accounting at Niagara University(2) said the income disparity between men and women could also potentially explain why men are more likely to owe back taxes.
“Women earn less income than men and possibly incur less tax liabilities,” she said.
Ultimately, Alajian said the best way to avoid owing back taxes — especially for those who are self-employed — is to have an accountant handle your monthly or quarterly bookkeeping.
“Don’t wait until year end,” she said.
Additionally, she warned that it can take up to two years to receive a notice that you owe back taxes.
“We’ve got a government shutdown looming which could slow things down,” she said. “But even without that, it’s not like the IRS is perfectly on time in sending notices.”
What You Can Do If You Owe Back Taxes
Receiving a notice from the IRS that you owe back taxes can be panic-inducing — especially if you don’t have the money to foot the bill. Try to remain calm, as you have plenty of options.
Eligible applicants are able to participate in a self-service, online payment plan through the IRS. You’ll sign an installment agreement, then work to pay off your outstanding balance over time.
Simply complete an application and you’ll be notified immediately whether you’ve been approved. You’ll either qualify for the short-term payment plan or the long-term payment plan.
The short-term payment plan has a payoff period of 120 days or less, with a total amount owed of less than $100,000 in combined tax, penalties and interest. The long-term payment plan has a payoff period greater than 120 days, with payments made monthly and a total amount owed of less than $50,000 in combined tax, penalties and interest.
If that route isn’t a good fit, consider working with a tax debt relief company. Tax Relief Advocates, for example, has a track record of resolving tax issues for thousands of clients.
You could also take out a 401(k) loan to pay your tax bill. Depending on the rules attached to your plan, you might be able to withdraw up to 50% of your retirement savings, up to a maximum of $50,000 over a 12-month period.
If you opt for this route, you’ll likely have to repay the money — plus interest — within five years of taking the loan out. You may also need consent from your spouse or domestic partner to do so.
Ultimately, there are plenty of options to help pay your tax bill. Find one that works for you and settle your business with Uncle Sam.
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