Let\u2019s face it. When you owe the IRS and can\u2019t pay, it\u2019s tempting to ignore the issue. Usually, this boils down to fear of the unknown.<\/p>\n
If you contact the IRS, will it get you in even more trouble?<\/p>\n
The reality is, you should only be afraid if you ignore the issue. If you ignore the tax bill you owe, the IRS can eventually force you to pay using several tools \u2013 like federal tax liens, levies, and wage garnishments. And that\u2019s on top of penalties and interest that will pile up.<\/p>\n
The good news: The IRS offers options when you can\u2019t pay the taxes you owe \u2013 from simple extensions of time<\/a> to monthly payment plans<\/a> \u2013 and even programs for people in financial hardship situations.<\/p>\n But if you\u2019re still weighing whether to get in touch with the IRS \u2013 here are the Top 10 consequences of ignoring your tax bill.<\/p>\n The IRS has to notify you of your tax bill and send certain notices before doing anything else, like collecting your balance with enforcement tools. In and of themselves, IRS letters and notices are a minor nuisance \u2013 but if you ignore them, they\u2019ll lead to more significant actions.<\/p>\n The IRS Automated Collection System (ACS) is your likely next stop if you ignore the notice. ACS is the primary IRS function that collects back taxes. ACS can issue liens and levy bank accounts and wages. The notices you receive from ACS will start to explain more serious consequences if you don\u2019t comply by the deadline.<\/p>\n If you owe taxes to the IRS and end up with a tax refund due to you in a later year, the IRS will keep the refund. That\u2019s true regardless of whether you\u2019re in an agreement to pay. The good news is that your refund will reduce the tax bill you owe, also reducing your interest.<\/p>\n On top of your tax bill, the IRS is going to charge you interest<\/a>. As the balance grows, so does the interest. The current rate is 5% annually.<\/p>\n On top of interest, the IRS charges a failure to pay penalty<\/a> on your unpaid tax balance (0.5% per month). But that penalty rate doubles to 1% per month if the IRS has sent you many notices to collect and you haven\u2019t made arrangements to pay. There is a little good news, though. Once you set up a payment agreement with the IRS, the penalty rate drops to 0.25% per month.<\/p>\n If you owe taxes to the IRS and got a notice about the balance due, but you didn\u2019t pay, the IRS can file a Notice of Federal Tax Lien. A federal tax lien alerts creditors about your tax debt, which basically protects the IRS\u2019 interest in your assets, if you try to sell property or borrow against it.<\/p>\n Because federal tax liens are public information, many people don\u2019t want the negative impact to their reputations. Also,\u00a0a lien will negatively impact your\u00a0access to credit.<\/p>\n Note: Declaring bankruptcy won\u2019t get rid of your tax debt and associated liens.<\/p>\n Practically speaking, even though the IRS has the right to file a Notice of Federal Tax Lien on a smaller balance, the IRS normally won\u2019t file one if you owe less than $10,000. And the IRS usually won\u2019t file a lien if you enter into certain payment agreements.<\/p>\n You might have heard that the IRS can \u201cseize your assets.\u201d Essentially, that\u2019s a levy (not to be confused with a lien). However, the IRS usually only seizes money. It\u2019s a huge hassle for the IRS to seize houses, boats, etc., and then sell them. In fact, the IRS only seizes property a few hundred times a year.<\/p>\n The most common levies are:<\/p>\n For individuals, levies can create a huge hassle and disrupt your ability to pay your bills. For businesses, levies can be devastating. By disrupting cash flow, levies can make it impossible to pay your employees, purchase supplies and inventory, and run your business.<\/p>\n Revenue officers are IRS employees who collect tax debt, usually when you owe large amounts of back taxes, owe for continuous years, and\/or have unfiled back tax returns. You\u2019ll want to comply with all your revenue officer\u2019s requests by the deadline, because they have the authority and the duty to quickly enforce back tax issues by filing liens and issuing levies.<\/p>\n Recently, the IRS added a new tax-collection tool to its list. If you owe more than $51,000 and the IRS has tried to collect from you before, but you\u2019re not in a payment agreement or other arrangement with the IRS, the IRS can label you a \u201cseriously delinquent\u201d taxpayer. When that happens, the State Department can restrict your passport. If after a few years the IRS has failed to collect your tax balance, the IRS can turn your account over to a private debt collector. Like you\u2019d experience with most debt-collection agencies, if your case goes here, you\u2019ll receive calls and inquiries from strangers. In short, not paying can lead to years of hassle.<\/p>\n Learn what to do when you can\u2019t pay your taxes<\/a> \u2013 to avoid these 10 consequences. Or, your H&R Block tax professional can help you investigate which payment option or other alternative is best for you and request it from the IRS.<\/p>\n Learn more about H&R Block\u2019s Tax Audit & Notice Services<\/a>. Or make an appointment for a free consultation with a local tax professional by calling 855-536-6504<\/strong> or finding a local tax pro<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" Let\u2019s face it. When you owe the IRS and can\u2019t pay, it\u2019s tempting to ignore the issue. Usually, this boils down to fear of the unknown. If you contact the IRS, will it get you in even more trouble? The reality is, you should only be afraid if you ignore the issue. If you ignore […]<\/p>\n","protected":false},"author":605,"featured_media":24521,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[25,51],"tags":[],"class_list":["post-35629","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-irs","category-audits-and-tax-notices"],"acf":[],"yoast_head":"1. You’ll get IRS notices.<\/h2>\n
2. The IRS will put you in automated collection.<\/h2>\n
3. The IRS can take your refund.<\/h2>\n
4. Interest will build up on your balance.<\/h2>\n
5. The IRS will charge you penalties.<\/h2>\n
6. The IRS could publicly file a federal tax lien.<\/h2>\n
7. The IRS can seize your money and assets.<\/h2>\n
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8. A revenue officer might show up.<\/h2>\n
9. You may not be able to travel abroad.<\/h2>\n
\nIf you don\u2019t have a passport, this restriction will prevent you from getting one. If you already have a passport, you won\u2019t be able to renew it until you are removed from the \u201cseriously delinquent\u201d list.<\/p>\n10. The IRS could give your case to a debt-collection agency.<\/h2>\n
Get some help from the experts<\/h2>\n