Spring can be a difficult time of the year when you owe a lot of money to the IRS. However, it is very important to file your taxes and pay your tax bill by the deadline because you may have to pay penalties for filing late and failing to pay. Additionally, interest starts to accrue after the deadline has passed.
What to do if you owe a lot of money to the IRS?
If you have not filed your tax returns for years and now you owe lots of money to the IRS, there are ways to deal with this issue but the best advice is to contact a tax attorney so they can explain all of the different steps and hopefully lower some of the money you owe. Regardless, you can set up an installment agreement with the IRS, which allows you to make payments according to a payment plan. There are advantages and disadvantageous to setting up an installment agreement, so it is best to understand the plan and its consequences before signing into one. You may also be able to apply for hardship, which means that at the current moment collecting money from you would cause you a great amount of financial hardship, based on the IRS’ financial standards.
What happens if you owe the IRS money and you don’t pay?
If you do not pay your taxes by the filing deadline, you may be hit with delinquency penalties and interest. Interest never stops until you have fully paid off what you owe. A late filing penalty is calculated by multiplying 5% (max of 25%) x the number of months (max of 5 moths) x the underpayment. Instead of not filing, you should consider applying for an extension. An extension will grant you some time to file after the April 15 deadline. You should definitely file your return and money owed by the end of the extension deadline to avoid penalties and interest. If on the other hand, you file your return but do not pay your taxes, the IRS will charge you a failure-to-pay penalty. The late payment penalty is calculated by multiplying .5% x the number of months x the underpayment. The late filing payment must be reduced by the late payment penalty for the time period that they overlap.
Can the IRS take all the money in your bank account?
The IRS is not allowed to do such an act without notice. The IRS will contact you and tell you that you owe them money. If after their multiple attempts to reach you to pay your taxes and they have not received any communication back, the consequences may be drastic – IRS levy, which is legal seizure of your property to satisfy the tax debt. An IRS levy can take wages, money from your accounts, seize and sell your vehicle(s), real estate property, and other personal property.