The IRS collects over 3 trillion dollars in taxes from individuals and businesses over the course of any given year. All of this money comes from roughly 245 million filed returns.
What happens though if filing your return this year slipped your mind or if you don’t have the money to pay the balance on a return you did file?
For consumers that have their backs against the wall when it comes to back taxes, images of the IRS hunting them down and making their lives miserable are common.
To give you some real perspective on what is possible if you own the government money, below, our team has broken down 8 “What happens if I owe taxes?” possibilities and shares with you a solution on how you can find your way out of tax debt.
1. You’ll Get Charged a “Failure to File Penalty” if You Don’t File Taxes
Most people reading this article probably filed their taxes and just owe money. What happens though if you neglected to file your taxes altogether?
If you don’t file, you can’t owe anybody anything, right?
Unfortunately, not filing your taxes altogether can be a lot worse than filing and not paying.
When you don’t file your taxes, you’ll be hit with a failure to file penalty. This penalty will charge you an additional 5% on top of everything you owe for each month that you don’t file your taxes. The penalty caps out at 25%.
2. You’ll Get Charged a “Failure to Pay” Penalty If You Don’t Pay Your Taxes
If you filed your taxes on time, received a tax bill, and don’t pay it, the first issue you’ll run into with the IRS is that you’ll be charged a failure to pay penalty.
Failure to pay penalties are a lot smaller than failure to file penalties given that they start at just a .5% fee on your owed taxes each month that you don’t send in a check. The upper limit to this penalty is 25%.
In addition to this penalty, you may also need to pay interest on unpaid taxes which can balloon your owed amount substantially.
3. Serious Notices Will Start Coming in From The IRS
If you’re delinquent on your tax payments, in addition to the penalties you’ll start to accrue, you’ll notice that your mailbox will start to accrue letters.
These letters from the IRS will typically be 30-day notices, 60-day notices and other serious notes that will ask you to contact an agent.
It’s best to not ignore these notices as it can exacerbate your problems. If you’re getting a lot of notices that you don’t know what to do with, contact the number provided in them and explain your situation to an agent. You can also contact a tax relief professional for advice.
4. Refunds Could Get Forfeited
Chances are, if you’re avoiding managing your tax situation, you probably don’t think you’re entitled to a refund.
If you were entitled to one though and simply didn’t finish filing the necessary paperwork, when you do file, you may forfeit your refund to interest, penalties or other fees.
5. Social Security Benefits Could Get Affected
Social security benefits are one of the main things that get cited when people ask, “What happens if I owe taxes?”.
Through the Federal Payment Levy Program, the federal government is allowed to seize your social security benefits until your back tax situation gets resolved. Any government benefits paid to your children can’t get touched under the scope of this program.
6. A Lien Could Get Put on Your Property
If you own a home and owe taxes, the government can put a lien on your property and may even take full procession of it depending on the severity of your “What happens if I owe taxes?” situation.
This lien is public and could be made apparent to your employer, your property’s other tenants, and your creditors.
7. Your Credit Score Will Suffer
Owing money to the IRS is like owing money to any creditor. It will result in a black mark on your credit score.
In addition to that, if the IRS has placed a lien on your home, that too can serve to further damage your credit.
Bad credit can result in your inability to purchase things and can hurt your ability to attain housing.
8. You May Get Summoned to Meet With an IRS Officer
If the IRS is having trouble putting together a clear picture on what you owe them, you may receive a legal summons to meet with an officer.
In some cases, third parties like representatives from banking institutions or financial managers may get summoned on your behalf. In any case, receiving a legal summons is binding and can be inconvenient.
In Conclusion, What are Your “What Happens If I Owe Taxes” Options?
If you owe an amount in taxes that exceeds what you think you can comfortably afford, it’s important to know that you can settle your debt and stop it from controlling your life by seeking help.
We recommend starting your search for help at Precision Tax Relief.
No matter what your unique tax situation is, Precision Tax Relief can give you the tools you need to relieve the stress that you’re under.
All you have to do is speak to one of our representatives.
To have your “What happens if I owe taxes?” questions answered and to obtain the peace of mind you’re looking for, schedule your call today!