Almost everyone knows that the IRS will come after you if they believe that money is owed to them. Few people love talking taxes but it’s still important to know a little bit about the largest expense most of us have to pay. Seriously, think about that for a second. Between federal, state and in some cases city taxes, it’s not uncommon to pay 1/3 or more of your income towards taxes.
Sometimes you fall on hard times and cannot meet your financial obligations. Nevertheless, the last thing you want to do is ignore your tax debts. The IRS has a 10-year statutory period to collect tax due and the stress of owing them can cause you to break out in a cold sweat. However, there are options available to you.
The IRS Collection Process
If the IRS believes that you have a balance due they will send you a Notice of Tax Due and Demand for Payment showing the amount owed including any penalties and interest. Several letters will likely follow and ultimately you will receive a Final Notice of Intent to Levy. At this point the IRS will increase the pressure by seizing your bank account, refunds, wages or other assets in order to collect the amount owed.
You can avoid these threats by establishing a payment plan. If you owe the IRS no more than $100,000 in tax, penalties and interest you can arrange to make payments in installments provided that you become current with your tax filings.
If there is little to no chance that your tax debt can be paid you may qualify for an Offer in Compromise (OIC). Athough rare OIC’s are available to taxpayers who:
- Have little to no chance of paying the tax owed
- Believe that the amount assessed is not correct
- Experience an economic hardship that might jeopardize future payment of the tax due
Businesses Also At Risk
This enforcement action is not limited to just individual taxes but payroll taxes also. Almost 72 percent of IRS revenue is from payroll taxes so when they go unpaid it can certainly be a wake up call. In instances where a business has outstanding payroll taxes the IRS can also seek to collect the balance due from the owner or another person responsible in the organization.
Whether business or personal the key is to take the necessary steps to address the tax due. The only things that go away if you ignore them are your teeth. Contact a tax professional and determine what your best options are so you can get your worries behind you.