6 Potential Consequences Of Having Tax Debt
If you owe taxes to the government and do not pay them, you may face serious consequences. The Internal Revenue Service (IRS) can take steps to collect unpaid taxes, including garnishing your wages, seizing your assets, and even filing a lawsuit against you. Additionally, you may be charged interest and penalties on the unpaid amount, which can significantly increase the total amount you owe.
If you are unable to pay your taxes, it is important to contact the IRS and discuss your options as soon as possible. The IRS Fresh Start Program consists of 4 main programs that are accessible to taxpayers who owe much more than they can reasonably afford to pay. If you ignore the problem, it is likely to only get worse and could lead to more serious consequences down the line.
If you have tax debt, it is important to address the issue as soon as possible, as the consequences of not paying can be severe. Here are some potential consequences of not paying your tax debt:
1. Penalties And Interest
If you don't pay your taxes on time, you may be charged penalties and interest on the amount you owe. In addition to interest, the IRS assesses a failure to pay a penalty of 0.5% per month on your unpaid tax balance.
However, if the IRS has sent you numerous collection notices and you have not made payment arrangements, the penalty rate doubles to 1% per month. Moreover, there is some good news. The penalty rate is reduced to 0.25% per month if you enter into a payment agreement with the IRS. These charges can quickly add up and significantly increase the amount you owe.
2. Wage Garnishments
The government can garnish your wages if you don't pay your taxes. If you owe the IRS money, they will use any means possible to collect it from you. A wage lien or garnishment is one method. That is when the IRS has the authority to take all or a portion of your monthly take-home pay to pay off your debt.
Nobody — neither the debtor nor the employer — wants to be in that situation. Setting up the process is both embarrassing for the debtor and inconvenient for the employer.
3. Seizure Of Assets
In extreme cases, the government may seize your assets, including your bank accounts, investments, and even your property, to pay off your tax debt. If you do not file an appeal or make arrangements within 30 days, the IRS has the legal right to seize your property.
Typically, before selling an asset, the IRS will provide you with an estimate of its fair market value. If you disagree with the amount, you can contest it. However, the process is complex, and you should seek the assistance of a tax professional from the IRS Fresh Start Program.
4. Tax Liens
The government can place a lien on your property if you don't pay your taxes. This means you can't sell the property until you pay off the debt. In the United States, if federal tax payments are delinquent and there has been no demonstrated effort to pay the taxes owed, the IRS may place a lien against a taxpayer's home, vehicle, and bank accounts.
Once a lien was filed, it would appear on the taxpayer's credit report, lowering the person's credit score. This could also prevent the taxpayer from selling or refinancing assets that have tax liens attached to them.
5. Loss Of Professional Licenses
If you have a professional license, such as a license to practice law or medicine, you may lose it if you don't pay your taxes. If a tax lien is issued and you try to renew your professional license, you will be denied and out of work. Any issues regarding back taxes, unfiled years, or any other tax-related problems may possibly be solved through one program; the IRS Fresh Start Program!
6. Loss Of Travelling Privileges
For those who like to travel, make sure you don't have any tax debt because the final consequence of your tax debt is preventing you from traveling internationally. The IRS has decided to implement this relatively new consequence. It primarily applies to those who owe more than $51,000 and have not responded to previous collection efforts or are not currently enrolled in a payment plan. In these cases, the State Department has the authority to restrict your passport or deny your application or renewal request.
Tax Debt Overview
If you are having trouble paying your tax debt, it is important to contact the IRS as soon as possible to discuss your options but in case where you cannot, you must get into a payment plan with the IRS that lets you pay your tax liabilities over a period of time. The IRS Fresh Start Program consists of 4 main programs that are accessible to taxpayers who owe much more than they can reasonably afford to pay. The four major programs are as follows: Currently Not Collectible (CNC) Offer In Compromise (OIC), Installment Agreement (IA), and Penalty Abatement (PA).
These relief programs from the IRS Fresh Start Program allow qualified taxpayers the option to reduce or even eliminate their tax debts. These tax experts will help you qualify for the program and help you figure out which options will give you the most suitable outcome. Especially if the agreed amount from the installment agreement that you've previously set up with the IRS is a bit harder to pay off these days. It is very important for taxpayers to remain tax compliant because it will save you interest and penalties on the current year and prevent you from a continuous circle of always owing tax.
Resolve Your Tax Bills
If you've found yourself in a nasty mess with the IRS, take a deep breath. For taxpayers who may have difficulty paying off an excessive amount of tax debt, there's a new and improved relief program that consolidates many major relief programs into a one-size-fits-all assistance program. Any issues regarding back taxes, unfiled years, or any other tax-related problems may be solved through one program; the IRS Fresh Start Program!
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