It’s that time of the year again, the time that some Americans dread and others (inexplicably) look forward to: tax season. It’s important that you pay your taxes on time for many reasons, not only due to your sense of patriotic duty.
Failure to make official payment of your taxes to the Internal Revenue Service could land you in hot water. If you don’t have the money your taxes and were hoping you might sneak by this spring’s deadline without paying, you might want to read about the potential pitfalls of this plan.
What happens if you don’t pay your taxes? Read on and we’ll walk you through everything you need to know.
Your Debt Will Grow
You might think you owe a lot to the government right now, but if you fail to pay you will have set yourself up to see the amount double or even triple. The amount you owe the IRS doesn’t stay a set amount. It grows the longer you owe it, thanks to the concept of interest.
The general interest rate for taxes owed is 2%. That might sound small at first, but if your total continues to be added to month after month, it grows faster than you think.
That’s not the only reason the amount you will have to pay will grow either. Often, you’ll also be hit with a penalty for not paying on time. This penalty for failure to pay might work differently depending on the situation at hand.
No matter what, it’s sure to add a significant portion to your total owed. On top of that, if you fail to file the next month and the next month, they can keep assigning you penalties.
You might think you’re skipping out on paying taxes to save some money, but in the long-term, you’re just increasing the amount that you owe. So skip that vacation to those 20 unusual places you wanted to visit in Australia and make sure you pay your taxes.
Wage Garnishment
If you stick your head in the sand and refuse to approach the problem at hand, you can bet your bottom dollar that it won’t just go away. The IRS will continue to increase their aggression in terms of getting the money you owe as more time goes by.
Ignoring their requests for payments on back taxes is not going to make them stop trying to get what they are owed. Instead, they make take more serious actions.
One of the most serious is the process known as wage garnishment. This is when the government contacts your employer and requests a certain percentage of your paycheck is taken out before it gets to you and is sent to the government. This garnishment would continue until your debt is completely filed.
Wage garnishment doesn’t require a court order and they can take a significant chunk of your paycheck. There’s a very good chance the IRS will take home more of your paycheck then you will.
They will also take any of the future tax refunds you get in later years. If you owe the IRS money, you can be sure they won’t be cutting you a check for any extra funds.
State and local tax agencies might be able to hop into the mix as well and garnish some of your wages. This can be a very difficult time to work through. It’s not all they might do either.
The IRS can make other significant moves to make your life very uncomfortable. If you owe a large amount of taxes, the IRS can even revoke your driver’s license and passport, making it illegal for you to drive or leave the country.
Seize Your Property
If you still aren’t paying the money you owe, the IRS can come after even bigger items and assets that belong to you. They might put a lien on your home, which is a claim to your property.
That means when you sell your home, the government will see all the money that they are owed before you see a penny of profit. They might also do this to your automobile or any other large assets that you may have in your possession. Not only is this a big hit to your assets, but it can also tank your creditworthiness in the eyes of most money lenders.
If you owe money to the IRS, it can be hard to find anyone anywhere that will allow you to borrow money or take out loans.
If you still haven’t paid what you owe, the IRS might even bring a lawsuit against you via the justice system. You might have to face charges for tax evasion, which is taken very seriously. In a best-case scenario, you’ll owe thousands of dollars more in fines. In a worst-case scenario, you might even end up behind bars.
You can count on them being aggressive in the pursuit of this money, and the only way to make it go away is to pay up. If you can’t do it, it’s worth talking with or negotiating with the IRS to see what might be possible. They might suggest payment plans or enrollment in the fresh start program.
If you have significant tax issues, it can be worth learning more about the fresh start program that the IRS offers.
Making an Official Payment to the IRS
If you need to make an official payment to the IRS, it’s better that you just get it over with. Failure to pay can lead to the drastic penalties outlined above.
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