What Happens If You Don’t Pay Your Taxes?

If you don’t pay your taxes on time, the penalties can be severe. The longer you wait to resolve your tax debt, the more difficult and costly it will be. As a taxpayer, it is important to understand the IRS collection process as well as your options for setting up a payment arrangement. If your taxes are not fully paid when you file your tax return, the IRS will send you a bill for the amount owed. This bill is the beginning of the collection process. >>

IRS Options If You Cannot Pay Your Taxes

Although the IRS always prefers that you find a way to pay your taxes in full, circumstances can sometimes prevent that from happening. If you find yourself in this predicament, the IRS does have options available to help you resolve your tax debt. Depending on your situation, you may be able to request an installment agreement, an offer in compromise, a temporary delay of collection, or an extension of time to pay.
Federal Tax Payment Options

There are several options for paying your taxes. To pay your tax liability in full right away, you can use “Direct Pay” on the IRS.gov website, which allows you to pay your tax bill directly from your checking or savings account. You can also make a payment by check or money order using Form 1040-V (Payment Voucher). If you don’t have enough funds available in the bank, you may consider paying taxes with a credit card instead. There are also some options if you don’t have enough money to fully pay your tax bill by the due date, such as an Online Payment Agreement or an Offer in Compromise.

What to Do If You Get a Notice from the IRS

Every year, the IRS sends millions of letters and notices to taxpayers for various reasons. There are many different types of notices issued by the IRS — depending on the notice you receive, you may have a range of options for responding. If you receive an IRS notice in the mail, you should first determine the nature of the inquiry and the stated deadline for a response. It is sometimes possible to get additional time to respond to a notice, and you might even be able to resolve the issue by simply calling the telephone number provided on the notice.

Information About Online Payment Agreements

If you owe more taxes than you can afford to pay right now, the IRS offers payment arrangement options. However, it is important to understand that regardless of your reason for paying taxes late, the IRS will charge interest and penalties for late tax payments. If you owe back taxes and you cannot find another solution (such as a bank loan or other financing alternative), you may be able to apply for an ‘Online Payment Agreement’ with the IRS.

Settle Tax Debt With an ‘Offer in Compromise’

An Offer in Compromise (OIC) may be your best option if you cannot pay your full tax liability, or if paying the full amount would cause you financial hardship. With an OIC, a qualified taxpayer can submit an offer to the IRS and request to settle their tax debt for less than the total amount due. But keep in mind, the OIC program is not for everyone and it comes with strict eligibility requirements.

How to Handle a Federal Tax Lien

A tax lien is a claim against property that the government uses to protect its interests in tax debt. The IRS will place a lien against your property only after it has sent you a bill and you have not paid it. Being hit with a tax lien is a stressful event, but if you understand the process, it will be easier for you to navigate.

What Is a Tax Levy?

If you owe back taxes, the IRS may place a levy on your property and/or assets. A tax levy is defined as “a legal seizure of your property to satisfy a tax debt.” The IRS may levy (i.e. seize and sell) any type of real or personal property that you own or have an interest in. This can include your home, car, bank accounts, wages, retirement funds, rental income, and more. It is important to understand how a tax levy can affect you, as well as your options for releasing a levy and resolving your tax debt.

IRS Tax Debt Relief

If you owe the IRS money, there are some key factors to keep in mind. The IRS is like any other “lender” – they are interested in collecting what they can, when they can. You should understand the benefit of paying the IRS what you can afford to pay, even if it’s a small amount. Ignoring your tax debt will impel the IRS to use tough tactics against you, such as garnishing your wages or taking your tax refunds. It is also essential to make sure you are well-represented when dealing with the IRS. There are many reputable firms with experience on how to best present your situation to the IRS.

5 Tips for People Who Owe Taxes

If you owe taxes, it may feel as though you’ve been cast adrift upon a sea of uncaring bureaucracy. Don’t despair — you have rights! You have the right to provide more information to the IRS if you can substantiate your claim that you owe less tax or have a basis for penalty relief. You also have the right to competent representation. In some cases, your best option for saving money will be to hire a qualified tax professional to argue your case for you. If you cannot afford a professional tax representative, you may qualify for the pro bono services of a Low Income Taxpayer Clinic (LITC).