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In current economic settings, many taxpayers have back tax balances they cannot pay. When faced with this situation, the worst choice a taxpayer can make is to ignore the problem and hope it will disappear, which will never happen, frankly speaking. The consequences of disregarding an overdue tax liability can be harsh financially.
With more resources being allocated to the IRS for enforcement, it will be increasingly more work for taxpayers with back tax balances to remain under the radar. The best action is prevention or paying the back tax balance in full if resources allow and, if not, to maximize the tax settlement options the IRS offers.
Although numerous new tax resolution programs have recently been initiated, the qualifying criteria are complex and may need to be confusing. For this reason, a taxpayer who owes back taxes may be best served by contacting a tax settlement professional to help determine which option will offer the most effective resolution for their specific circumstances.
Ignoring the looming debt of back taxes is detrimental and can lead to severe repercussions, especially when the IRS intensifies its enforcement measures.
If you’re a busy person, a side hustler, or perhaps an executive of a company, handling your own taxes, may consume your precious time. Why not let the professionals at American Tax Defense alleviate the burden with forward-thinking solutions?
Assessment of Interest and Penalties
Back tax balances are compounded over time by adding interest and penalties to the extent that it is not uncommon for these additional charges to total as much as 50% of the original tax liability.
Enforced Collection Activities
Although the IRS will begin collecting back taxes with passive techniques such as issuing an IRS letter or an IRS Notice, the collection methods become more aggressive the longer the tax bill is left unpaid. Eventually, the IRS may file a tax lien, issue a tax levy, or initiate a wage garnishment.
If you didn’t file a tax return for a specific tax year, the IRS typically assesses a tax liability based on the information they have. This can lead to unpaid back taxes.
Over time, interest and penalties accumulate on this amount. If you expect a tax refund for that year, you might lose it. It’s crucial to file past-due tax returns and address any tax debts promptly to avoid further complications.
The Internal Revenue Service (IRS) sends notices or letters to inform taxpayers of their delinquent tax debt. If these initial communications are ignored, the IRS intensifies its collection efforts.
This can include filing federal tax liens, issuing a tax levy, or initiating wage garnishment. The longer tax bills remain unpaid, the more aggressive the IRS becomes in its collection methods.
Certainly. A tax lien is a legal claim the IRS places on a taxpayer’s assets, like a bank account or property, due to owed taxes. It signifies the IRS’s right to the asset if the debt isn’t settled.
An IRS levy, on the other hand, is the actual confiscation of assets to cover the tax debt. For instance, the IRS can levy bank accounts, wages, or tax refunds to recover the unpaid amount.
Wage garnishment is a method the IRS uses to collect tax debts directly from a taxpayer’s income. When a wage garnishment is issued, the IRS instructs the taxpayer’s employer to withhold a specific portion of their wages, which is then forwarded to the IRS.
This continues until the debt is settled or other payment plans, like installment agreements, are arranged. Facing wage garnishment can lead to financial hardship, so it’s essential to address it immediately.
