06 Jun Consequences of not paying tax debts
By Atty. Crispin Caday Lozano
It is rarely a good idea to decide not to pay your IRS tax bill. The consequences of this can be severe, including prison.
If you don’t pay the IRS what you owe and don’t attempt to work out a payment plan, the government can use your tax refund to offset what you owe.
After this, the government will begin a collection process. The IRS can file a tax lien against you, use a levy and serve a summons.
A tax lien will come before any other action. Because tax debt is secured debt, the government has a legal claim to your property. This means the IRS has the right to seize your property to cover owed taxes.
A tax lien is automatically filed 10 days after the IRS sends you a notice of taxes owed. It appears on your credit report and can affect your score for seven years after the debt is paid off.
A levy comes after a tax lien. A levy is the actual seizure of your property and is used to pay off your debts. It may include seizing and selling your physical property, such as a car or house, or it may include taking money from a source such as your paycheck or bank account.
A levy can occur only after 30 days have passed since you were issued a tax lien.
At any point, the IRS may also issue a summons. In the case of tax debt, this is used to force you to produce documents. This can be used to investigate your financial standing.
Ignoring a summons can have severe consequences, including fines and imprisonment.
If you haven’t paid a tax debt, the best way to avoid lasting consequences is to clear the debt as soon as possible. Pay it if you can. Otherwise, apply for a payment plan or ask for an extension. In many cases, the IRS will work with you to get the debt paid.
Note: This is not a legal advice.