Owing taxes to the IRS is no laughing matter. Failure to pay, or making arrangements to pay, can lead to severe consequences, including liens or seizure of property, wage attachments and other actions that can impact one’s employment, credit score and ability to secure a mortgage, for many years.
However, being aware of how the enforcement process unfolds can be helpful in avoiding stress, saving time and, possibly, money.
An initial failure-to-pay-notice from the IRS gives the recipient 30 days to pay or respond to the letter. In the event neither of those actions takes place, a second notice goes out, giving the person an additional 30 days to pay, respond or request a hearing before receiving a notice of “Intent to Levy.” That notice marks the government’s intention to file a federal tax lien against the delinquent taxpayer, which is a legal claim against his or her current and future property, such as their home and car.
The IRS also provides a public notice, alerting other possible creditors that the federal government has priority over others to whom the taxpayer may owe money. Following the issuance of a lien, the person again has 30 days to pay their tax bill, arrange a payment agreement or request a hearing. In the event none of those options occur, the IRS can begin attaching wages, retirement income, bank accounts and Social Security benefits. Certain income is exempt from seizure, such as unemployment benefits, some annuity and pension benefits, worker’s compensation and court-ordered child support payments, according to the Internal Revenue Service. The IRS is also likely to prohibit any future federal tax refunds while taxes are still owed.
The last step before the IRS begins property seizure is the Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
Should a taxpayer find themselves in this obviously challenging state, there are procedures in place to help resolve the matter. A delinquent taxpayer can request a temporary delay, based on his or her financial status or inability to pay. Another option is to apply for an installment agreement, keep in mind, interest and penalties continue to accrue until the balance is paid in full. There is also a collection due process hearing and a collection appeals program, one can request. For those who can demonstrate an inability to repay the tax liability without suffering economic hardship, an application can be made for an Officer in Compromise to reach an agreement to reduce and settle the balance owed. To be eligible, a taxpayer must have filed all tax returns and make required tax payments for the current year.
To learn more about your rights and responsibilities as a taxpayer visit www.irs.gov. The Taxpayer Bill of Rights can be found on the government website. Members of the military may be eligible to defer their payments.
If you have questions or concerns about your tax liabilities, we are here to help. Contact your tax advisor at Diamond & Associates, PC today!