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As an Enrolled Agent (EA), I am a tax professional who has earned the privilege of representing taxpayers before the Internal Revenue Service (IRS). Unlike other tax preparers, EAs specialize in tax matters and have demonstrated their expertise by passing a rigorous three-part exam administered by the IRS.
How the IRS Handles Tax Delinquency:
What You Need to Know
If you owe money to the IRS (tax delinquency), it’s important to address the situation promptly to avoid additional penalties and interest. Here’s how the IRS handles tax delinquency:
- Penalties and Interest: The IRS will assess penalties and interest on your unpaid taxes. Penalties can accrue for failing to file on time or failing to pay the amount due, while interest accumulates on both the unpaid tax and any penalties.
- Tax Liens: If you don’t pay your tax debt, the IRS can place a lien on your property. This means they have a legal claim to your property as security for your debt. A tax lien can affect your credit score and make it difficult to sell or refinance your property.
- Wage Garnishment: The IRS can issue a wage garnishment order to your employer, directing them to withhold a portion of your wages to pay your tax debt. This continues until your debt is settled or the IRS releases the garnishment.
- Bank Account Levies: The IRS can levy, or seize, funds directly from your bank account to satisfy your tax debt. This means they can take money out of your account without your prior consent.
- Property Seizure: In severe cases, the IRS can seize and sell your personal property, such as your car, real estate, or other assets, to satisfy the debt. This is usually a last resort after other collection methods have been exhausted.
What can you do:
- Payment Plans: If you can’t pay your debt in full, you can request an installment agreement. This allows you to make monthly payments until your debt is paid off. The IRS offers different types of payment plans depending on your financial situation.
- Offer in Compromise: You might qualify for an Offer in Compromise (OIC), which allows you to settle your tax debt for less than the full amount owed. This option is typically available if you can demonstrate that paying the full amount would cause undue hardship.
- Collection Due Process Hearings: If the IRS issues a notice of intent to levy or file a lien, you have the right to request a Collection Due Process (CDP) hearing. This provides an opportunity to discuss your case and propose alternative solutions.
- Tax Refund Offsets: The IRS can use any tax refunds you are due to offset your unpaid taxes. This means they can apply your refund to your tax debt.
- Contact the IRS: If you owe money, it’s crucial to communicate with the IRS. Ignoring the problem will only make it worse.
- Seek Professional Help: Consider consulting a tax professional, such as an Enrolled Agent or attorney who can help you navigate the complexities of your tax situation and negotiate with the IRS on your behalf.
Addressing your tax debt proactively can help you avoid more severe collection actions and work towards a resolution that fits your financial situation. Need further help, contact us.
