Taxes that have been unpaid in the year that they were due. Taxpayers can have unpaid back taxes at the federal, state and/or local levels. Back taxes accumulate interest and penalties on a regular basis. Unpaid back taxes can be a serious issue for many taxpayers who don't have the means to pay them. The Internal Revenue Service (IRS) has recently turned over the collection of unpaid back taxes to a private collection agency. Taxpayers who lack the means to repay taxes may often negotiate a lesser settlement via an offer in compromise with the IRS either directly or through a tax attorney.