What Are The Consequences Of Owing Back Taxes?

When you owe the IRS money in back taxes and can’t pay, you might be tempted to ignore the problem. You’ll usually ignore the problem because you don’t know what to do about your back taxes. It might cross your mind that contacting the IRS will get you in even more trouble. However, the worst decision you can make when it comes to back taxes is ignoring the issue. If you ignore the back taxes you owe, the IRS can force you to pay. The IRS can take collection actions on you, such as federal tax liens, bank levies, and wage garnishments. Plus, penalties and interest will pile up on your back taxes. However, there is good news. The IRS offers options when you can’t pay the back taxes you owe.

If you still choose to ignore the IRS – here are the top consequences of ignoring your tax bill.

The IRS Will Contact You

Before the IRS takes any other actions on you, they will send you notices of your back tax debt. The IRS will send you notifications in the mail before taking any additional steps to collect your back tax debt. These notifications might seem easy to ignore. You might figure that if you don’t respond, it’s like you never got the notice, right? Wrong. If you ignore notifications from the IRS, it will lead to more significant actions. The best thing to do as soon as you start receiving letters from the IRS contact a tax relief company. A tax attorney can begin responding to the IRS immediately, so you don’t have to. Tax resolution experts can also help you determine which back tax settlement options are best for you.

Automated Collection Calls Will Come For You

The IRS Automated Collection System comes next if you ignore notifications from the IRS. An Automated Collection System is the primary IRS function that collects back taxes. This IRS system can issue liens and levy bank accounts and wages. The notifications you get from the Automated Collection System will explain more severe consequences if you don’t pay.

The IRS Can Take Your Refund

If you owe back taxes and end up receiving a tax refund, the IRS can keep your refund. Regardless of whether you are in an Installment Agreement, the IRS can keep your tax refund. However, your tax refund will reduce the back tax bill you owe, which will also reduce your interest.

You’ll Accumulate Interest On Back Taxes

The longer you go without paying back taxes, the more interest that will accumulate. In addition to your tax bill, the IRS charges you interest. As the balance increases, so does the interest. The current interest rate for IRS tax debt is 5% annually.

The IRS Will Add On Penalties

In addition to interest, the IRS charges a failure to pay penalty on unpaid back taxes. The penalty charge starts at 0.5% a month. However, that penalty rate doubles to 1% per month if you haven’t made arrangements to pay back taxes despite the IRS’ notices. For that reason, once you start receiving notices from the IRS, it’s imperative that you act immediately. A tax relief expert can help you set up an affordable monthly payment plan with the IRS. Once you set up a payment agreement, the penalty rate drops to 0.25% per month.

Federal Tax Liens Can Become Your Biggest Nightmare

Have you received a notice from the IRS that you owe back taxes and still haven’t paid? The IRS can file a Notice of Federal Tax Lien on you. A tax lien protects the IRS’ interest in your assets if you attempt to sell a property or borrow against it. Federal tax liens are public information, so many people don’t want the negative impact on their reputations. A tax lien will also negatively impact your access to credit. As a note, declaring bankruptcy won’t get rid of your back tax debt or liens. However, the IRS won’t file a tax lien unless you owe more than $10,000 in back taxes. Therefore, if you owe more than $10,000 in back tax debt, call a tax resolution professional immediately.

The IRS Can Take Your Money And Assets

What does it mean that the IRS can “seize your assets”? Mostly, it’s called a tax levy when the IRS can take your assets. The IRS will usually like to avoid seizing assets if they can. Typically, the IRS seizes property only a few hundred times a year. There are various types of levies. The most common types of levies are:

  • Wage levies (wage garnishments): Occurs when the IRS takes money from your paycheck.
  • Accounts receivable levies: The IRS takes the money you’ve earned as a small business or independent contractor.
  • Bank levies: You can have money removed from your bank account by the IRS.

For individuals, levies can disrupt your ability to pay your bills. Moreover, for small businesses, levies can be devastating. Working with a tax relief professional can help release these levies before they do too much damage.

You Might Get A Visit From A Revenue Officer

When you owe back taxes, Revenue Officers might show up at your doorstep to collect your taxes. You will usually get a visit from a Revenue Officer if you owe a large amount of back taxes. Comply with the Revenue Officer’s requests by the deadline. If you don’t, they have the authority to enforce back tax issues by filing liens and issuing levies. By consulting a tax relief expert, they can work directly with the Revenue Officer on your behalf.

Traveling Abroad May Become Difficult

The IRS has another tax collection tool under its belt. If you owe more than $51,000 in back taxes, the IRS can label you a “seriously delinquent” taxpayer. When that happens, the State Department can restrict your passport. If you don’t have a passport, you won’t be able to get one. For those with a passport, they won’t be able to renew it until they are no longer considered “seriously delinquent.”

The IRS May Send Your Case To A Debt-Collection Agency

If you don’t pay your back taxes, the IRS can turn your account over to a private debt collector.

Avoid Back Tax Debt Consequences By Calling Platinum Tax Defenders Today!

Hiring a tax relief specialist can get you a better deal when attempting to pay off back taxes. A tax relief specialist can also save you a lot of hassle and consequences when you owe back taxes. A tax attorney can help you determine which repayment method is right for you. The tax resolution specialist can also negotiate with the IRS on your behalf and submit the necessary paperwork. Owing back tax debt can leave you in bad financial shape. The IRS only wants to get what money you owe them in back taxes. Often, they are willing to help you settle back taxes, but you have to know how to try. That’s where a tax relief services company can come in handy. When you hire a tax resolution professional, there are other methods you can use to avoid expensive back tax debt. Call Platinum Tax Defenders for a free consultation today.

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