Failing to pay your taxes can lead to serious consequences. The IRS is one of the most aggressive debt collectors out there, so it is important to pay your taxes as soon as possible, even if that means setting up a payment plan and paying your tax debt over time.
Below are some possible consequences of failing to pay your taxes:
- Late penalties: Late penalties are usually 5 percent of the unpaid taxes you owe for every month you delay filing your return, up to a 25 percent cap. If you file your tax returns but fail to pay the penalty is 0.5 to 1 percent of your unpaid taxes per month.
- Withholding of future tax refunds: If you have an unpaid tax debt to the IRS one year, and are owed a refund the following year, the IRS will keep your tax refund up to the amount you owe to help cover the balance.p>
- Reports to credit agencies: Your unpaid tax debt can be reported to credit reporting agencies, thereby lowering your credit score significantly. Unlike other debts which will eventually disappear from your credit report, tax debts stay on forever.p>
- Arrest: This is for the most serious of tax debt dodgers. If you owe over $25,000 there is the possibility you can be arrested for your failure to pay taxes.p>
The good news is that if you make an effort to remedy the situation the IRS will work with you. The IRS offers payment plans for those having troubles paying their tax debts in full. The worst thing you can do is ignore the problem, it will only get worse. The IRS knows people can suffer financial difficulties, so they’ve arranged payment plans for taxpayers. You will pay interest and/or late fees, but you will avoid more serious consequences.
If you have an unpaid tax debt and need help, contact Saint Louis tax preparation expert James Coats at (314) 645-1614 for help with your IRS tax troubles.