Navigating The Consequences Of Back Taxes

We’ve all heard about the importance of paying taxes, but what happens when you fall behind? Whether it’s due to an unexpected life event, or simple oversight, it’s important to understand the consequences of not paying your taxes on time. Failure to pay taxes can lead to serious consequences, including wage garnishment, asset seizure, and legal action. Here’s what happens if you owe back taxes and what steps you can take to resolve the issue.

1. The first thing that happens if you owe back taxes is that the IRS will start sending you notices. These notices will inform you of the amount of tax you owe, any interest or penalties that have accrued, and the deadline for payment. If you ignore these notices, the IRS will continue to ramp up its collection efforts. This can include wage garnishment, where the IRS takes a portion of your paycheck to satisfy your tax debt. If you’re self-employed, the IRS may seize your accounts receivable, or take other legal action to collect the debt.

2. If you still don’t pay your taxes after receiving multiple notices, the IRS may file a lien against your property. This means that your tax debt will become public record, and creditors will be able to see the lien. A lien can prevent you from selling or refinancing your property until the debt is satisfied. The IRS may also seize your property to satisfy your tax debt, including your home, car, and other assets.

3. Another consequence of failing to pay your taxes is damage to your credit score. A tax lien can stay on your credit report for up to 10 years, and will impact your ability to obtain credit, including loans and credit cards. This can make it difficult to buy a home, purchase a car, or even rent an apartment.

4. The good news is that there are steps you can take to resolve your back tax debt. One option is to set up a payment plan with the IRS. This will allow you to make monthly payments towards your tax debt, and avoid the consequences of continued non-payment. If you can’t afford to make payments, you may be able to qualify for an Offer In Compromise, where the IRS agrees to settle your tax debt for less than the total amount owed.

5. If you owe back taxes, it’s important to take action as soon as possible. The longer you wait, the more severe the consequences of non-payment become. Contact a tax professional or the IRS directly to discuss your options for resolving your tax debt.

Conclusion

Owing back taxes can be a stressful and overwhelming experience. However, it’s important to remember that there are steps you can take to resolve the debt and avoid the most severe consequences. By setting up a payment plan or negotiating an Offer In Compromise, you can take control of your tax debt and avoid wage garnishment, asset seizure, and damage to your credit score. If you’re struggling with back taxes, reach out to the IRS or a tax professional for assistance.