I know first hand that you're at the IRS's mercy when you owe tax debt. The IRS will do anything and everything to make sure you pay. Even if it means dipping into your pay or taking funds right from your paycheck. I think it's review time. With IRS Collections looming, let's go back to basics and cover the Top 5 Most Common Troubles.
IRS Penalties and Interest, It Keeps Growing & Growing
The IRS imposes harsh penalties for those who do not pay their taxes on time. The IRS’S late payment penalties (“Failure to Deposit”, “Failure to File” and “Failure to Pay”) can double the amount you owe the IRS in no time flat. Combine this with the Interest, which compound daily, and you're debt will be an out of control burden that you'll have no clue how to resolve.
Payroll Tax Problems- Small Business Beware
Small Business Owners are struggling in this economic slump. But to add insult to injury, the IRS has publicly announced them as targets. The IRS believes that Small Business are far more likely to avoid paying taxes, they say Small Business Owners are the largest components of the tax gap. So even if you make a tiny mistake, you're in big IRS trouble.
Tax Lien: Credit Ruined
IRS will enforce tax liens to make its claim against your money and property for the debt you owe them. Federal Tax Liens are public records that show how much you owe in Federal Taxes. When these records go public, your credit report will never be the same again. It will nearly impossible to do anything involving credit. When I worked at the IRS, Tax Liens were the biggest complaint. People would call in begging us to stop the Tax Liens, which were preventing them from taking out a loan, selling their own home or property, or applying for new credit cards. But we didn't budge, Tax Liens cannot be removed until the debt is paid in full.
Bank Levy: All Funds Gone in a Flash
You're in big trouble if you get a “Notice of Intent to Levy” in your mailbox. This means a Bank Levy is coming. An IRS Bank Levy starts with a letter the IRS will send your bank notifying them of the seizure. Your bank will freeze your funds and then forward them to the IRS if you don’t act immediately after you receive the “Notice of Intent to Levy” from the IRS.
Wage Garnishment: Goodbye Paycheck
A Wage Garnishment allows the IRS to automatically takeout a set amount from each pay check. The amount is based on your filing status and number of allowable exemptions. More than likely, you will not have enough left over to pay for all of your bills. The worst part about a Wage Garnishment is that it can go on until your tax debt is repaid in full.
Get the Help You Need
First of all, it's vital to file and pay your taxes on time every year if you don't want to be afflicted with any of the tax problems listed. If you already owe the IRS, it's time to be proactive. Do not wait for the IRS to contact you because it will be a hell of a lot harder to resolve your debt problems by this point. Get your finances together, make a case for yourself, consult with a professional for a course of action, then contact the IRS (or have someone do it on your behalf) so you can resolve your tax debt once and for all.