The Risk Your Taking By Not Paying Your Taxes
Filing and paying taxes is something every working American will have to do at some point. While the tax system can be complicated to navigate and understand at times, paying taxes is still something that all companies and individuals earning income are required to do.
The IRS understands that mistakes happen, or things are sometimes forgotten, with tax filings. When something requires correction or fulfilling payment obligations is problematic for someone, the IRS will usually try to work directly with the taxpayer to rectify the situation. Tax payment plans can be worked out with the IRS, and in some cases, you can even settle the amount you owe for a much lower amount.
However, if it is determined that a person is intentionally not filing for the taxes that they owe or has decided not to pay their taxes, this can be considered a criminal act known as tax evasion. Let’s take a look below at what happens if you don’t pay your taxes.
Interest and Penalties Accumulate
When taxes are not paid by April 15th for the previous year’s taxes due, interest and penalties begin to accumulate on day one immediately. This can add up to quite a bit more than you originally owed over time, as the annual interest rate is 5% and the monthly penalty is .5% of what you owe.
The penalties and interest will continue to accrue even if you are on a payment plan with the IRS, so it is best to adjust your paycheck withholdings to ensure you are paying enough in taxes. If you overpay, the IRS will refund you when you file.
Collections and Revenue Officers
After attempting to collect payment and contact you for several months, the IRS may enlist a private collections agency to assist them in obtaining the money owed.
In some situations, namely those who have balances higher than $10,000, the IRS may assign a revenue officer, which is an IRS employee that will visit you personally to seek resolution on balances owed.
Liens
A tax lien is something that will allow the IRS to seize any funds you potentially make on property or asset sales that you conduct. If you were to sell your home, for instance, the IRS can legally seize the amount you owe from those proceeds.
Liens are also placed on your credit report and can affect your ability to obtain new loans or lines of credit until they are removed.
Levies
A levy is different from a lien in that it is an actual seizure of your assets. The IRS can seize and sell private property to satisfy a tax debt. These things can include:
- Homes
- Cars
- Property
- Art
- Jewelry
- Valuables
- Tax refunds due to you
If there are no physical assets, the IRS is also able to levy bank accounts, paychecks, and any social security payments until all debt is paid in full.
Criminal Prosecution and Passport Restriction
In extreme cases, the IRS can have your passport suspended or permanently revoked through the State Department, resulting in your inability to leave the country.
If the IRS notes flags of continual non-payment or possible intentional non-filing, especially repeatedly, they will conduct an audit. An audit will explore every corner of your finances looking for inconsistencies. If a hint of criminal intent is found, the IRS will then open a primary investigation to determine if they need to file charges. Then, if they decide charges are necessary, the case will be referred to the Justice Department for proceeding. In some cases, this can lead to jail time.