Nobody likes taxes. Still, everyone needs to pay them to avoid expensive penalties and the consequences that come with it. Still, if you owe the IRS and you don’t have the funds to pay for it, you may feel tempted to ignore it altogether because you’re afraid that it will get you into more trouble. However, what you should worry about is ignoring the tax bill you owe, as the IRS can force you to pay through several tools like wage garnishments and federal tax liens on top of the penalties and interest. Tax problems are hard to deal with, but not dealing with them at all can land you in hot water.
Luckily, the IRS offers a few options for those who cannot pay the taxes they owe, such as monthly payment plans, extensions, or programs for those in financial hardship. Still, if you’re undecided about whether or not to get in touch with the IRS, here are five consequences of neglecting your tax bill to keep in mind:
You Won’t Be Able to Travel Abroad
The IRS has recently added a new tool to its list of tax collection methods. It labels those who owe more than $51,000 and have not yet paid or arranged an agreement with the agency as a “seriously delinquent” taxpayer. Once you have this label, the State Department can restrict your passport, preventing you from traveling abroad. However, if you don’t have a passport, then it can prevent you from applying for one. You won’t be able to renew your passport until you pay your taxes and they remove you from the “seriously delinquent” taxpayer list.
You’ll Be Placed in Automated Collection
If you ignore the notices that the IRS sends you to pay for your tax bill, you’ll then be placed in the Automated Collection System or ACS, which can issue liens and levy bank accounts and income. The ACS notices will outline the more severe consequences if you do not pay your taxes by the deadline.
The IRS Will Keep Your Refund
If you owe a tax bill to the IRS and you end up being eligible for a tax refund in a later year, the IRS will keep it even if you’re in an agreement to pay what you owe. However, your refund will reduce the amount and interest you owe. If you’re worried about your rebate, be sure to contact a tax resolution specialist, as they can walk you through the process and help you identify the best options for your situation.
The IRS Will Charge Costly Penalties
The longer you go without paying, the more interest the IRS will charge you, which means you’ll end up with a bigger balance and a higher interest. Additionally, the IRS will charge you a penalty for failing to pay your taxes at 0.5 percent a month. The penalty rate will double to 1 percent a month if the IRS issued several notices to collect your dues and you haven’t arranged to pay yet. However, once you start a payment agreement with them, the penalty rate will decrease to 0.25 percent a month.
The IRS Can Seize Your Assets
The IRS can seize your money through wage levies or wage garnishment if you don’t pay your tax bill. If you contact them to arrange payment, however, they’ll stop touching your income. They can also do accounts receivable levies, which means they’ll take the money you earned as an independent contractor or a small business owner. Lastly, they can take money from your bank account through bank levies, but they won’t resort to any of this if you set up a payment agreement with them. Levies can interrupt your budget and ability to pay your bills, so it’s best to contact them to settle your tax bill right away.
It can be overwhelming to see how much you owe in taxes, but it’s always best to contact the IRS and arrange a payment scheme to settle the amount. Otherwise, you’ll face many consequences such as these, which can affect your quality of life and hamper essential payments, such as rent and utilities. However, working with a tax resolution specialist will help you figure out the best way to resolve your tax issues and work towards debt relief.
Axiom Tax Resolution offers tax resolution services to those struggling with their taxes. We can help you find a payment plan and other tax relief solutions to help you settle what you owe and enjoy being debt-free. Contact us today to learn more about what we can do for you!