Tax debt is not unusual for people. While many want to settle the debt quickly and continue to live, others choose to ignore it. Excluding your tax debt doesn't make it go down, so it may have a detrimental effect on your life in other ways.
The effects of unpaid taxes are here.
No federal reimbursement.
You may be due a refund when you file your taxes. In fact, you get a check via e-mail if you have your money on your banking if investing account, but the IRS won't refund you if you have a tax debt. The IRS will then keep your refund and be placed on the balance owing to your tax debt. And this continues until the entire tax liability is reimbursed.
Interest and punishment.
If the tax debt is outstanding, the IRS imposes interest and fines. You will probably see 5 percent of interest on your tax debt added every year unpaid. Ultimately, this will increase the total amount of your debt. For many, as debt increases steadily over time, it is more difficult for them to pay off their debt. This is probably going to happen if you wait too long to pay off your debt.
Passport denial or revocation.
Seriously overdue tax debt will result in your passport being refused or revoked. It is considered seriously delinquent if your debt, including interest and sanctions, is more than $53,000. When the IRS certifies this obligation to the State Department, the visa will be denied if you ask for a passport. If you have a passport already, it will be revoked.
Cash and properties seize.
When you buy houses , cars or other properties, the IRS will seize this property in order to offset the tax liability costs. This is called a levy. In addition to having the option to take your property, the IRS can take money from your bank accounts or small business money and collect your wages. This can create a challenge for you if you have other monthly costs.
Collection of debt.
One way that the IRS can seek to collect a tax debt is to transfer it to a private debt collection agency that collects that debt. When this occurs, the debt management department can use many means of contact to help you address your tax debt.
This can also have a negative impact on your credit!
Tax relation.
If the taxes remain unpaid for a period of time, the IRS will lodge a Federal Fiscal Lien Claim. You don't get the properties that you own, such as your house or car. And creditors will know this, which makes it hard for you to be approved for any kind of loan. There are ways to remove the lien and have property returned to you, but it is simplest to pay the tax obligation.
You should appreciate that the budget can not require you to pay the full tax liability before the due date. It may be tempting to ignore the tax debt, but before you decide not to pay your debt you will consider the consequences. And with IRS supplying taxpayers with several ways of servicing their tax debt, you can settle your debt to escape the repercussions of other citizens opting not to pay their taxes.
