The IRS takes it very seriously if you don’t pay your taxes on time. It’s important to make arrangements if you can’t pay everything you owe or if you are suffering from financial hardship. If you fail to do anything, the IRS has multiple options at its disposal. Here are 3 ways the IRS can collect on unpaid taxes.
The IRS can place a lien on any property in your name and any future property you buy for the next ten years. This includes real estate like your home or business as well as personal property, such as automobiles. The IRS will send you notice of a lien by a letter of demand for payment and notice of federal tax lien. It will likely stay in effect until you’ve paid your taxes and you may need to request that it be withdrawn once the taxes are paid. You will not be able to sell your property as long as the lien is in place.
2. Tax Levies
A levy allows the IRS to take the property which already has a lien on it. The IRS may also levy your bank accounts, stocks and other assets that are in your name. You will receive a final notice of intent to levy from the agency. To avoid a levy, you will need to prove it will cause economic hardship. You can also appeal it. A levy can be stopped if you set up a payment arrangement with the IRS. A levy may be in place for one day and all the money in the account will be taken or it may be an ongoing levy, which means any money which goes into that account will go to the IRS until the taxes are paid in full.
The third way the IRS can collect taxes is also the most extreme. They can seize the property you own and physically take it from you. They will sell this property and apply the money to the owed taxes. Certain property may be exempt, and you may be able to prove economic hardship if you act quickly. For example, child support and unemployment benefits are usually exempt from seizure. The clothing you own or other personal items may also be exempt, but other property could be sold at market value to pay your taxes.
The IRS typically takes the least extreme method first in collection issues, but they will utilize all resources at their disposal to get the money owed. If you owe taxes and cannot pay in full, it’s important to communicate with the IRS before any of these actions take place. Don’t fail to respond to any letters or other correspondence you receive from the IRS. Otherwise, you may find yourself in a situation where you’ll have to face one of these actions being taken against you.
You can also work with an expert and allow them to help you make arrangements with the IRS. This becomes even more important if the agency has already indicated that it is taking one of the above steps. Don’t wait before you can’t do anything. Take action today.