Owing money to creditors is one thing, but when you owe money to the government, it’s a genuinely serious situation.
When you don’t pay your back taxes, the IRS can file a Federal Tax Lien. The lien is a public record showing that you owe the IRS and giving them the right over other creditors to seize your property. If a lien is attached to your property, you cannot sell the property without a clear title. If you settle your debt with the IRS, the lien is released within 30 days after payment (or immediately if payment is in cash).
The IRS can issue a levy against your property, including your home, vehicle, and bank account. The levy gives the IRS the right to seize your property to cover your tax debt.
You do have options though:
Installment agreements are arrangements with the IRS to let a taxpayer pay his or her full tax liability over a period of time. A monthly payment is negotiated between the IRS and the taxpayer for a specific length of time.
Offer in Compromise
An Offer in Compromise lets you reach an agreement with the IRS to pay less than you owe, often substantially less. However, not all taxpayers qualify. An Offer in Compromise hinges on factors such as the taxpayer’s age, income, health, assets, and liabilities.
Lien & Levy Release
When you don’t pay your back taxes, the IRS can levy your wages as well as file a Federal Tax Lien. The levy allows the IRS to confiscate your entire paycheck except for the value of the exemptions you’ve claimed while the lien is a public record showing that you owe the IRS and giving them the right over other creditors to seize your property.
Tax Penalty Relief
When you don’t pay your back taxes, tax penalties and interest accumulate quickly and increase the amount you owe. If particular circumstances contributed to your payment problem, or if you had a legitimate reason for falling behind on your taxes, the IRS may permit the removal or abatement of tax penalties and interest.
General Tax Resolution
Unfortunately, a tax problem can start with just one missed deadline or one missing tax form. Don’t let your tax problems pile up until you’re buried in red tape and IRS penalties.
Some Helpful IRS Resources
* Form 9465 (pdf) - Form used to request an installment agreement.
* Online Payment Agreement - An application for submitting your installment agreement request online directly on the IRS.gov Web site.
* Form 433-F (pdf) - A financial statement, also called a Collection Information Statement, used by the IRS to analyze a taxpayer's income, living expenses, and value of assets.
* Offer in Compromise - Overview of Offer In Compromise agreements.
* Offer in Compromise Pre-Qualifier - Make sure you are eligible for an Offer In Compromise.
* Form 656 Booklet - Step-by-step instructions and all forms for submitting an Offer In Compromise.