Individuals that don’t pay their taxes in full by the deadline of April 15 each year are subject to a monetary penalty. The IRS can charge up to 6 percent interest on the unpaid balance and may choose to add a late payment penalty of 0.5 to 25 percent. Individuals that don’t pay their taxes are digging themselves a financial hole that can be almost impossible to escape.
Notices about the unpaid balance will begin to arrive and the letters will take on a more severe tone the longer a taxpayer ignores them. The IRS may place a tax lien against any property and financial assets that the person owns. The IRS will then be entitled to some or all of the money if an asset is sold.
Even if the actions aren’t reported on the taxpayer’s credit report, liens are part of public records. It can affect the person’s ability to maintain security clearance, obtain employment, a credit card or loan. Filing bankruptcy is no guarantee that the lien or tax bill will be dismissed.
The account may be sent to a collection agency for recovery. For those that owe tens of thousands of dollars or more, an individual could receive a visit from a revenue officer. During this time, the IRS may begin seizing assets.
The law says the IRS can take the taxpayer’s vehicle to sell at auction, 401(k) accounts, IRAs and homes. The State Department may get involved and can refuse to renew or issue a passport or revoke an existing passport.
However, what many don’t know is that the IRS generally won’t pursue individuals for unpaid taxes after 10 years, but they might, due to the 10 Year Statute of Limitations. The IRS doesn’t consider it in their best interests or cost effective to continue trying to collect and will wipe it clean from their books. It’s a complicated process that can be temporarily suspended under circumstances and the only one qualified to advise an individual on this is a tax professional.
At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs. We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!