These are the Consequences of Tax Debt
It can be very appealing to ignore when the IRS sends notices of tax debts. The anxiety that such notice causes can be significant. The current Covid19 pandemic is exacerbating this issue, as many have lost their jobs, bills are piling up and there is no end in sight.
Although pretending your tax debt does not exist is an option, we do not recommend ignoring IRS notices at all. There are some serious long-term consequences of accruing tax debt that we would like to share with you today. If you do not seek tax help to get tax relief, you could be setting yourself up for serious problems.
IRS NOTICES? YOU COULD END UP IN COLLECTIONS
If you ignore the IRS notices coming to your doorstep, it is only a matter of time before you end up in the IRS’ Automated Collections System (ACS). Continuing to ignore the ACS may result in wage garnishment and liens against your bank accounts. The consequences will increase in severity as time goes on.
SAY GOODBYE TO YOUR REFUND
If you have tax debt due to the Covid19 pandemic or any other reason and were supposed to receive a refund, the IRS will automatically put your refund toward your balance of the debt owed.
INTEREST AND PENALTIES WILL ACCRUE
The longer your tax debt remains unpaid, the more interest and late payment penalties will build up. The current IRS interest rate is 5%. For larger balances, this can quickly compound and leave you owing much more than the original amount. There is also an additional failure to pay the penalty that starts at .5% monthly but increases to 1% if notices have been sent out and ignored.
Let Ideal Tax give you some tax help. We can work with you and the IRS to lower your tax debt with programs such as the IRS debt forgiveness. For instance, once a payment plan for back taxes is established, the failure to pay penalty drops to .25%. That is some tax relief that can really help.
TAX LIENS
If you leave the IRS waiting for payments on back taxes, they can file a federal tax lien against you and your assets. This goes on your credit report and is public knowledge. It can be an embarrassment to your reputation and have serious consequences when it comes to borrowing money or selling properties you may own. It is important to note that declaring bankruptcy will not resolve IRS tax liens.
SEIZURE OF ASSETS
The IRS can take assets such as homes and vehicles, but they tend to mostly go after monetary assets such as your wages, accounts receivable if you own a small business, or other bank accounts. This can be a huge disruption to your life and cash liquidity, preventing you from meeting other financial obligations you may have.
LOCKDOWN
One final, often unknown result of tax debt can be passport suspension. If you have a seriously delinquent account, the IRS can restrict your ability to travel abroad.
As you can see, the consequences of tax debt can be quite serious and disruptive. If you are struggling with this, call ITS, our specialists will work with you to resolve your issue.
We provide professional guidance to people whose lives have been affected by tax problems. To evaluate your specific tax issue and determine if you qualify for tax relief, please contact us for a free consultation. We are COVID-19 prepared, we will work with you over the phone and via e-mail.
The content of this post does not replace the advice of a licensed tax professional. Consult a qualified tax professional for questions specific to your circumstances.