Do you owe the government back taxes? Are you aware of the potential penalties you face?
When filing taxes, you always hope you’ll get your return. But if you owe money to the IRS, it may make you a bit nervous.
If you don’t pay back taxes owed on time, you could face steep penalties that hurt your bank account even more. Don’t make the mistake of thinking that your tax liabilities will simply fade away if you ignore them.
Keep reading this guide to learn more about what happens if you haven’t been keeping your obligations to the taxman.
What Happens When You Don’t Pay Your Back Taxes?
If you owe back taxes, you may be subject to several penalties. The Internal Revenue Service (IRS) can assess a failure-to-pay penalty of 0.5% of your unpaid taxes for each month that the taxes remain unpaid.
In addition, the IRS can charge interest on unpaid taxes. The interest rate is currently 4%, but it is subject to change. If you don’t pay your back taxes, the IRS may also file a Notice of Federal Tax Lien, which gives the IRS a legal claim to your property.
The IRS may then seize your property, such as your bank account or your home, to satisfy the tax debt.
Can You Go to Jail for Not Paying Your Back Taxes?
Yes, you can go to jail for not paying your back taxes but only under certain conditions. For example, if you are found guilty of tax evasion, such as by filing a fraudulent return or helping someone evade taxes, you could be jailed for up to 5 years.
If you don’t file a return, you can also land in jail for a year for every year you missed filing. If you didn’t pay your taxes simply because you didn’t have the money, the IRS will not charge you criminally, and you will not go to jail.
What Must You Do if You Can’t Pay Your Back Taxes?
What happens if you owe back taxes? The IRS can take many different tax collection measures against you. They can levy your wages or bank accounts, file a notice of federal tax lien, or even file a lawsuit against you.
If you are facing any of these actions, don’t sleep on them. Instead, take active steps to resolve the issue. Many times, the IRS will make you an offer in compromise or a payment plan if you cannot pay the full amount owed.
Who Can Help You When You Have Tax Debt?
The only person who can help you when you have problems with back taxes is a tax professional. But not all tax professionals can help you equally.
You’d like to work with one who is experienced with IRS negotiation. One thing’s for sure: it will take expertise to build your defense against the IRS.
Settle Your Back Taxes as Soon as Possible!
Remember, the longer you stall dealing with your back taxes, the more you will eventually have to pay penalties and surcharges. If you can’t pay, you could lose more properties as the IRS tries to recover your taxes.
So act now and start by finding a seasoned tax professional who can help you. The best way to deal with this kind of problem is just to deal with it once and for all.
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