Regardless of how much you owe in tax debt, if you elect not to pay it there are a couple of things you should expect. The first is that your tax debt will increase due to the accumulation of penalties and interest. The second is that the IRS will try to collect back taxes. Both of these can have an impact on your finances. Collection efforts such as a lien or levy can be even more damaging, as they can compromise your money and your credit.
Many taxpayers postpone or avoid payment of tax debt because they are not aware of the penalties and interest the IRS charges on back taxes. As these fees are charged each month on the total tax debt amount, what’s owed quickly grows beyond the original liability. In order to have an accurate estimate, taxpayers must calculate the amount they need to pay in penalties and interest. When you consider the addition of these fees, it’s in your interest to pay your tax debt as early as possible.
Along with these charges, unpaid taxes also attract collection actions by the IRS. Initially, the IRS sends notices to collect back taxes. If the notices remain unanswered or no resolution efforts are made, then the IRS may issue a federal tax lien. If the case remains unresolved, the IRS can also levy wages and property.
Due to these measures the IRS takes to collect back taxes, it’s best for a taxpayer to resolve their debt as soon as possible. Early resolution is always the best course of action, whether or not outside help is involved.