What Happens If I Owe Income Taxes?
If you filed your income taxes showing an amount due and did not send the money, the Internal Revenue Service (IRS) or your state Department of Revenue will send you a bill or a letter asking you to pay the amount due or call to make payment arrangements. Failing to make payment arrangements or pay the bill could result in interest and penalty charges, wage garnishment, a bank account levy, or a tax lien against your property.
What You Should Do If You Owe Federal Income Taxes
According to the IRS, if you owe income taxes and cannot pay, you should still file your return by the deadline, and then call it at 800-829-1040 to discuss payment options. Depending on your circumstances and the amount owed, you may be able to get an extension of time to pay, work out a payment plan, or settle the bill for less than you actually owe. The IRS may even waive penalties and delay turning your account over to collections until you can pay.
If you do not pay your tax in full by the extended due date or according to a settlement agreement or do not stick with your payment plan, the IRS may put a lien against your property, levy (take) your bank or retirement account or federal benefits, garnish your wages, or seize your personal property, such as a car, boat, or real estate. At the very least, the IRS will keep any future federal income tax return until your bill is paid in full.
What You Should Do If You Owe State Income Taxes
Just like the IRS, the state Department of Revenue can levy your accounts, put a lien against your property, and seize your wages and assets if you fail to pay your bill. So, you should go ahead and file your return on time, and then contact the Department of Revenue about payment options. Most likely, you will receive a bill and information about your options shortly after your return is processed. Whatever you do, do not ignore a bill from your state Department of Revenue. Not only will the unpaid bill will damage your credit, but some states are very aggressive about recovering taxes due and will take your bank account or garnish your wages with very little notice to you before they do.
If you are being threatened with garnishment or a levy, please contact our office at 1-800-219-3577, for a free, no obligation consultation.
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