June 3, 2022
tax debt

Owing the IRS can be a scary and confusing time, especially if you don’t know what to expect. The IRS has protocols and collection activity that it’s known for to collect past due balances. Being aware of such consequences may inspire you to take care of your tax debt sooner than later.

Interest and Penalties

Interest is added to your tax liability daily until paid; with a 25% maximum penalty. In April 2022, the IRS raised its interest rates for the quarter for quarterly taxpayers, such as businesses and self-employed filers.

Penalties include:

  • Failure to file – same due date as your return or extended return.
  • Failure to pay – due on the date you receive a notice, or the IRS assess the penalty.
  • Accuracy-related – same due date as your return or extended return.

IRS Wage Garnishment

The IRS has the ability to garnish your wages when you have an unpaid balance. This means that your income can be seized and applied to your tax liability. Garnishments can be taken out of paychecks, commissions, and bonuses. By paying the balance in full, or setting up a payment plan, you can stop garnishments.

IRS Levy

You would receive a notice prior to the IRS levying the balance. This consequence is for delinquent taxpayers and involves the IRS legally seizing your bank accounts, wages, or property to settle the tax debt. To stop a levy, contact the IRS directly. If you can prove that you’re in hardship, they may release the levy. You can also pay the balance in full to release a levy sooner.

IRS Lien

Liens are placed on physical assets, such as homes or vehicles, to satisfy tax debt. This means that the IRS takes possession of your assets, or collects a portion of what you make for selling them. You can avoid a lien by paying your balance in full, on time, or by contacting the IRS for a payment plan.

IRS Passport Denial

Major tax debt can result in the denial of acquiring a passport. State Departments can also revoke an existing passport if you’re delinquent. The IRS is allowed to deny citizens the right to travel internationally. If you receive a notice while overseas, you may receive a temporary passport to return to the US.

You can reverse passport denial by changing your status (no longer seriously delinquent), if the debt becomes legally unenforceable, or by satisfying the tax debt.

Unaffordable Tax Debt

If your tax debt has gotten out of hand, give us a call for a free consultation at (800) 536-0734. One of our associates can help you understand your options for tax debt relief.