Being behind on taxes with the IRS (https://taxfoundation.org/taxedu/glossary/internal-revenue-service-irs/) can be frightening, but you have options, and you aren’t alone. This guide outlines the process and available options, as well as the practical steps you can take to protect your income and assets throughout the process of getting your taxes back on track.
How Does IRS Handle Unpaid Taxes?
If you owe taxes and do not pay them, the IRS will send you a bill. If you do not respond, you will receive more notices, potentially culminating in collections. Once the IRS moves your account to collection status, they may file a federal tax lien or levy your wages, bank account, or other assets against the taxes owed.
You can ask the IRS for payment plans, a hearing to appeal, or some sort of compromise that fits your financial situation. The sooner you act to address unpaid taxes, the more flexibility and less stress, and potential added cost you will have.
Options When You Can’t Pay
If you can’t pay taxes owed in full, the IRS provides options for tax relief. A few minutes on the telephone with an Atlanta GA tax attorney or an enrolled agent can provide you the pros and cons relevant to your situation.
- Installment agreement: Pay your tax balance over time in monthly payments that are affordable for you.
- Offer in compromise: When you can prove and show appropriate documentation that you cannot afford to pay the tax balance owed, you can settle for less than you owe, and the IRS will forgive the remaining balance.
- Currently uncollectible: If paying would cause hardship, you can pause your active collections, along with paying now, because the IRS will check your budget.
- Requesting penalty abatement: If you qualify for first-time abatement or have caused a reasonable penalty, you can request the IRS to get rid of some penalties from your account.
Each option brings rules and paperwork. Get organized, consider proof of income and expenses, and continue to file future returns timely.
Penalties and Interest Explained
Penalties begin when you file late or when you do not pay on time; interest accrues daily until your balance is completely paid. The failure-to-file penalty is usually larger than the failure-to-pay penalty. Therefore, it remains a good idea to file a return even if you are unable to make continuous payments. If you begin to work out your specific tax problem early, there’s a good chance some of your penalties will not continue to grow.
If an event in your life has resulted in the problem, for example, loss of income, sickness, or a natural disaster, you may request penalty abatements. Interest cannot generally be abated, however, you can find opportunities to reduce penalties and ultimately find the path toward affordable tax resolution.
Can IRS Garnish Wages?
Yes. After required notices, the IRS can levy your paycheck and send part of each pay period’s earnings to the government. The levy stays until the debt is paid, a levy release is granted, or you enter an approved resolution. Click here to learn more. You can often stop or prevent garnishment by setting up an installment agreement, qualifying for currently not collectible status, or submitting an offer in compromise.
If you are sent a Final Notice of Intent to Levy, you should act immediately. You may have the right to make an appeal and time to provide a better proposal to the IRS before the money is taken from you.
Steps to Avoid Tax Liens
Tax liens attach to property and will limit your availability of credit and other opportunities. The best defense against a lien is acting quickly on an approved tax resolution option and communicating with the IRS in good faith.
For assistance, contact the Cumberland Law Group in Atlanta, GA as a local option:
Cumberland Law Group, LLC
Galleria Pkwy Suite 1500, Atlanta, GA 30339
- Always file every return even when unable, as it decreases penalties and creates good faith while filing past due returns.
- Open and respond to IRS correspondence. Deadlines are important and can switch to a levy or a lien.
- Implement a payment plan as soon as possible so the IRS can disallow enforced collection.
- Become timely with new taxes, through adjusting withholdings or making estimated payments, since your debt will not grow.
- Document hardship. If your bills are outweighing your income, collect evidence to support currently uncollectible status or other options.
There are ways to move forward despite owing taxes. By knowing your rights and thinking about which option best fits you, you can protect your paycheck and your assets while working toward full compliance.
