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Each year, taxpayers are required to file a tax return to the IRS, or Internal Revenue Service. They are also required to pay federal taxes annually. These taxes are used to fund the federal government and its programs, including defense, maintaining national parks, welfare programs and much more. Most taxpayers will grudgingly prepare their returns as required. While the process of preparing a tax return can be tedious, paying taxes is rarely pleasant. Some who have held taxes withheld on their income throughout the year may receive a refund when they file a return, but many others have a tax bill that is due when they file their taxes.

While some are able to pay their full tax bill on time, others do not pay their taxes on time or in full. Some simply file a late tax return, and others may not file a tax return at all. Some will underestimate their taxes due to the IRS intentionally because they do not have the funds available to pay for the full amount owed, and others will underestimate their taxes through a miscalculation. Unfortunately, the IRS generally views failure to file and pay taxes on time in the same way regardless of the reason. Regardless of your current tax situation with the IRS, it is important that you explore options to correct the issue.

What Happens If You Fail to Pay Your Taxes on Time?

The IRS makes it expensive for taxpayers to file their tax returns late. Taxes are generally due in full by April 15 each year, but there is some variation to this based on holidays and weekends. If you fail to file your tax return by the specified due date, you may be subject to a fee of 25 percent of your total taxes due. It is not enough to simply file your tax return by the due date. You must also pay your full tax bill by this date to stay in good graces with the IRS. If you fail to pay a portion of your taxes owed, you may be subject to a fee of up to one percent of the amount outstanding each month until the funds are paid to the IRS. In addition, a penalty of up to 25 percent of the amount owed may be charged to you. If you file your tax return on time and pay your bill in full, you may still be assessed a penalty if you grossly underestimate your taxes due. In fact, this penalty may be as much as 20 percent of the amount owed to the IRS.

What Happens If You Fail to Pay Your Penalties?

As you can see, the penalties and interest charges that the IRS may assess can be expensive. If you are already having trouble paying the base taxes owed to the IRS, the additional cost of the penalties and interest charges can be burdensome. If you fail to pay the full amount owed to the IRS, including back taxes, interest and penalties, the IRS can take several steps to force payment. For example, they may contact your employer to garnish your wages. Wage garnishment may continue until the amount owed is paid in full. The IRS also has the right to take the money directly out of your bank account if you have funds available to pay the bill. Another strategy the IRS uses to force payment is to place a lien on your property. When a lien is on your property in the amount of the taxes due, the lien must be paid when you sell the home or when you refinance your home mortgage. Keep in mind that a lien can also damage your credit rating.

What Are Your Options for Federal Tax Relief?

There are a few options that you can consider using if you want relief from your federal tax situation. The IRS offers a Fresh Start program. You must meet specific guidelines to qualify for this program. You can also set up an installment payment plan to slowly pay the IRS the money owed over the course of a year or two. Some taxpayers may also pursue an offer in compromise. This is a way to settle the debt for a reduced amount. You may need to work with a tax attorney to set up an offer in compromise.

How Can You Get Back on Track With the IRS?

When you owe the IRS money, you may understandably feel stressed and worried. Many people have heard nightmarish stories about the IRS seizing property or sending people to jail for tax evasion. While these things can and do happen, they do not have to happen to you. You can get back on track with the IRS by working with a tax accountant and a tax lawyer. By exploring your options, you can set up a plan to pay the money owed to the IRS in a way that is affordable for your budget.

Income taxes can be burdensome. Some people are unexpectedly surprised by a high tax bill, and others may be facing financial challenges, such as the loss of a job. There are many reasons why you may not be able to pay your tax bill right now, but you do not want to fall into trouble with the IRS. Take time to explore payment options today to avoid penalties, interest and other issues.