4 IRS Actions Imposed When You Owe Back Taxes

Posted by: Brookside Admin

Gathering documents and preparing your taxes can be a stressful time for many of us. When you have unpaid taxes, however, that stress compounds and extends throughout the year. Owing back taxes introduces a number of difficult situations and penalties the IRS could impose on you. If you owe money to the IRS, your first step is to contact the tax professionals at Brown Kinion and Company CPAs. We'll help you make the right decisions so you don't make your situation worse. Here are some common problems associated with unpaid taxes. 

  • Collection Notices 

The preferred form of communication from the IRS is through traditional mail. If you owe back taxes, or have failed to file a return in the past, you'll receive notices frequently. These should be taken extremely seriously and action should be taken immediately. Typically, with each new collection notice that arrives, a new penalty and fee has been tacked onto your debt. Your best option is to contact the IRS directly as soon as you realize you owe additional money. This will help guide you on what exactly you need to submit, and even work out a repayment plan. Your next step would be to get the IRS the documents they need, and start paying them the money you owe. 

  • Garnished Wages

Unlike other types of debt, taxes owed to the IRS can be repaid in a number of ways. For small debts and minor mistakes that are taken care of quickly, a check can usually be sent through the mail and the problem goes away. For larger debts, the IRS may inform you that your wages will be garnished each month until your debt is repaid. The IRS will always notify you and your employer before garnishing wages, but once they begin, the garnishment won't stop until you don't owe any more money. With interest and penalties, this could result in years of additional money being taken out of your paycheck and paid directly to the IRS. It's in your best interest to instead negotiate a payment plan that helps you pay back money faster. 

  • Threatening Property 

Another option for the IRS to recoup back taxes is to place a lien on your property. This will prevent you from selling or refinancing your home if the lien is on your house, but it can be put on other property as well. There are a few different options for how to remove a lien, or allow other creditors to move ahead of it to lessen the severity, but the simplest is to pay the IRS the money you owe. Similarly, the IRS can contact your bank and demand that they turn over money in your accounts. If there's more than you owe, they'll simply take what's owed to them, but if you don't have enough in your bank accounts, they could clean you out and put other penalities in place. This is another clear example of why contacting the IRS directly and negotiating a payment plan is better. 

  • Spouse or Business Issues

Many times, an individual's tax debt stems from their business, or actually belongs to their spouse. If your spouse is to blame, there are dive different tax codes that can protect you and your assets from their debt. Contact a tax pro for help deciding which applies to you and your situation. If your business owes back taxes, it's an even more serious problem. Failing to pay payroll and employment taxes could be considered theft and leave you vulnerable to criminal charges. In these situations, it's much better to take action before the IRS comes demanding unpaid taxes, or at least to respond immediately. 

Each of these can cause serious problems for individuals and business owners. The keys to repaying your debt and staying away from the worst of these possibilities is to communicate with the IRS, and to enlist the help of tax professionals as soon as possible. 

Call us at Brown Kinion and Company for advice and tax help. We'll help you stay clear of tax debt, and guide you through any existing problems with the IRS.