When you find yourself in the unfortunate position of owing taxes, you may be worried that your personal assets can be at stake if you are unable to pay. The one thing you don’t want to do is ignore the notice. The first thing I would recommend is that you take the time to read through your tax bill and explore all of your possible and available options.
It is not uncommon for a taxpayer to face a financial hardship that makes it difficult for them to pay off their tax bill. What is most important is that some type of a payment arrangement or plan is made with the IRS in order to resolve the debt. Unpaid tax liabilities accrue additional interest and penalty which increases the balance due over time so the earlier you are able to pay it off, the less you will pay in total.
Federal Tax Liens and Levy
In order to satisfy a tax debt, legal claims can be placed against a taxpayer’s personal property and other assets by the IRS. This is called a Federal Tax Lien. They can also legally take or seize such property, which is called a Levy. (For example your home, vehicle, boat, etc.) Their goal is to collect the delinquent tax and that may result in them going after your assets.
When a taxpayer fails to pay their tax bill, the IRS will first send out notices of the delinquency. I know the panic nerve gets struck when a notice of payment due is received. The notion that the IRS may be coming after you is enough to keep you up at night. You never want to ignore mail from the IRS because it can result in them issuing a final notice of intent to levy. Try to make arrangements early enough to settle your debt.
The IRS has several options available to taxpayers regarding paying their tax debt.
- Direct pay from your bank account.
- Pay by debit card, credit card or even PayPal.
- Installment agreements can be made.
- Offer in Compromise-Where the debt can be settled for less than you owe, if you qualify.
Filing and paying your taxes on time is the best solution; however, there can be circumstances beyond a taxpayer’s control that puts them in the tough spot of owing taxes. Small business owners, who are not aware of the requirement of making quarterly estimated taxes, can end up with a tax liability when they file their tax return. Also, corporations that are responsible for submitting payroll taxes can find themselves in a situation if they do not submit as required.
Now that the economic pause, which was caused by Covid-19 is behind us, the IRS has made a lot of improvements to their website with tons of resources to benefit taxpayers. If you have a simple tax situation and you are confident that you can resolve it on your own, you can start by calling the TAS. You can also find valuable information by clicking on the following link:
Understanding a Federal Tax Lien | Internal Revenue Service
Enrolled Agents, Tax Attorneys and Certified Public Accountants (CPAs) are able to represent you as a taxpayer before the IRS. These tax professionals have the knowledge and expertise and can navigate the system. They are better positioned to negotiate on your behalf to resolve your tax issues. Help is out there for you so don’t lay awake at night. More importantly, don’t delay. Get help as soon as possible.
Additionally, the Taxpayer Advocate Service (TAS), which is an organization within the IRS, is there to help taxpayers and also protect their rights. Before letting your account go into delinquency, reach out for assistance and take advantage of every option available. Remember, the government’s goal is to collect their tax revenue. They are not necessarily interested in your assets. They just want what is legally theirs.
If you have an unresolved tax debt with the IRS and need assistance, reach out today!
Sherma Lisa Stewart, MBA, EA, is the Founder of SLS Accounting & Business Consulting Services, which offers Accounting & Bookkeeping; Tax Services; Business Advisory and Financial Planning.
When you entrust your business finances to SLS Accounting & Business Consulting Services, you will have the confidence that your books will be maintained with the utmost level of accuracy and professionalism. The goal is to keep your business compliant and prepare your books for year end close-out as well as tax preparation. To learn more about Ms. Stewart and SLS Accounting & Business Consulting Services, please visit the website below. You can also books a complimentary consultation