Sometimes life gets overwhelming and often the debt accumulated by individuals can make life feel overwhelming, but you can not ignore real life situations. Have you ever met someone that just ignores bills sent to them, tosses them in the can and pretends that throwing them out negates their power?
Tax time just passed for most of us, unless you filed extensions, and taxes had to be paid. Do you know that there are people who simply refuse to pay their tax debt? With this ignorance comes no bliss, in fact, trouble follows.
I have to tell you after talking to a few people about taxes, and failure to pay, I can not urge you enough to not ignore your tax debt, rather learn 4 consequences of ignoring tax debt, and see what it is so important you pay your taxes, anyway you can!
It’s time to pull up those big girl and big boy britches and face life head on. Just like credit card fees that mount up over time, the interest on accumulated debt can take your life over, unless you start the course to stopping it! Lavishly live life out loud, educated and informed on 4 consequences of ignoring tax debt.
Don’t Get Into Hot Water
There is just no way around taxes, remember, you have to pay taxes and not doing so can be a serious issue. In fact, the top resulting factors of ignoring taxes owed to the IRS can be: Property Seizure, Interest and penalties, jail time and liens against any lines of credit you own. If you are not summing this up already, you pretty much lose your life for failure to pay.
I once had a girlfriend who had everything from a Jaguar, to a beautiful home with a hot tub. Money was nothing to them, in fact, at 16 she had her mom’s credit card, a vehicle, tons of cash to spend, vacations to those hot spots we crave and her own horse and horse stable.
Most would be envious, but she was just HER, and I loved spending time with her because life was interesting. As time passed things changed, furniture was disappearing from the house, trips diminishing, cars being taken, and suddenly she no longer had a credit card.
School debt needed paid, and her dad…. divorced the mom, and he was sent to jail! He had not paid taxes in years, and it caught up to him, they were living the high life on money that was owed to the government. Life just was over for their family and the dad refused to make things right.
Reflecting back to that story pains me for many in the same situation, but you can change the path, you can pave it and smooth things over. In fact, I have spent time researching where to find help, what the consequences are and where to sell your home or get help with the sales, and how to pay back debt. I am hoping if this article can help just one person, I have done something great.
As for my girlfriend: Her life is a mess, she ended up marrying a banker, her mom is alone (had to get divorced because she was not the reason for the tax mess, so he saved her from under the bus) in life and the dad is nowhere around. It is all just a tragic ending to a great family.
Let’s look at this a bit more in-depth. If you’ve found yourself in hot water with the IRS, it can be tempting to pretend like everything is fine, but doing so will only see you facing serious consequences. You can not ignore your responsibilities to pay what’s owed to the government and if you do that is a surefire way to find your checking accounts depleted, wages seized, and real estate property was taken.
4 Consequences Of Ignoring Tax Debt
Need a few more consequences that failure to settle your debt can have or maybe you want to learn what you can do to avoid this harsh reality and how to save money to ensure your bills are always paid?
1. Get Interested in the Penalties
The longer you take to pay back a debt to the IRS, the more you’ll pay overall. If you don’t file, you’ll face a penalty fee that can add up to thousands of dollars. The penalty is at first 5 percent of the total tax owed, up to five months from the deadline date.
What this can add up to is 100 percent of the total debt owed depending on how long it takes for you to pay off your debt. But wait, there’s more: On top of these penalty fees, interest will accrue gradually until your total debt owed is significantly more than what you owed in the first place.
And that interest rate can crush you! The interest rate doesn’t stay the same; it’s determined on a quarterly basis and can compound daily. Generally, it’s determined using the federal short-term rate, which can range from 1 to 4 percent, with an additional 3 percent—this adds up to the interest of 4 to 7 percent.
The Notice Arrival That You Did Not Pay
Seriously, you are not dealing with a small organization, they will find you and hunt you down and they will want to know why you have not paid. If you don’t file your taxes or fail to send in your payment, the IRS will send you multiple notices, with most offering a 30 to 60 day period for your response.
TAKE ACTION: Once you receive a notice, it’s important to immediately get in contact with the number listed on your notice. The IRS is willing to work with truant taxpayers, as long as you show a willingness to work out a way to handle your debt.
2. What’s Yours Is Theirs
Love that property you are living in, but failed to pay taxes on? The government is going to love on your favorite property too, right after they get what they are due, and that will happen when they place tax liens on the accounts and property of an individual who owes them money. Suddenly someone else owns what was yours because of your failure to pay! These liens are basically IRS claims to your assets. This public declaration might be filed to employers, creditors, and landlords, and even a single lien can have a disastrous effect on your credit.
3. Property Seizure – Hey That’s Not Yours!
While a lien is a claim to your property, a tax levy is a surefire seizure of your assets. This may be your car, your bank account, your house, and yes, even your paycheck. Imagine heading into the office, receiving your biweekly paycheck, and discovering a large chunk of your wages are missing. “Hey That’s Not Yours!” but yes it is theirs.
The reality that ignoring IRS notices face. If you can prove you’re facing an economic difficulty and paying off your debt would cause too much of a financial hardship, the IRS might refrain from property seizure, but it’s not something to bank on. Take control of your situation, don’t let it get to this stage.
4. No More Freedom
It’s rare, but there are cases in which taxpayers who have repeatedly failed to pay what they owe face jail time. How is this for a kick in the pants? You earned money, you failed to pay taxes, and now, without any real crime other than not paying you are headed to jail. You are not a hard criminal but a hard-ass that just failed to follow the rules. Come on, stay out of jail, hot water and away from all the liens and interest, just pay the bill.
**Please note**** Jail time is more prevalent in cases in which fraudulent returns have been filed, and usually it comes about after an attempt to hide income from the IRS.
Pull Up Those Big Girl/Boy Pants And Fix Things
Don’t sit on that debt anymore, take action, so you can determine what to do to correct the malice of your ways. First, seek help, because your options are limited, and it’s always advisable to pursue help from a tax professional or company like this place I found online Community Tax.
Many of those facing insurmountable debt will request payment plans, an offer in compromise, or in the direst of cases, file for bankruptcy. Just do what you have to do to settle it out, don’t let this rule your life. If you’re facing a large amount of debt, make sure you come up with a strategy to pay it off as soon as possible.
You can do this, get someone to hold your hand through it, and stand up to the consequences, you are so much stronger than the debt that is pushing you over. There’s a lot of living for you to do out there, lavishly live life out loud and avoid the 4 consequences of ignoring tax debt.
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