Learn More About Other Tax Problems
Garnishments/ Bank Account Levies/ Tax Liens
If you have unpaid taxes the IRS or State have some nasty methods of collecting tax bills. Tax agencies may seize your bank or brokerage accounts. They can levy (garnish or seize) a big chunk of your paycheck, and they can clamp tax liens on your real estate. Although the IRS will not normally seize your home or funds in an IRA or retirement plan, federal law gives them the power to do so.
Unfiled Returns
In the USA there is no "statute of limitations" for murder or not filing a tax return. If you rob a bank, the Feds have 5 years to catch and charge you. If it's arson they have ten years. Didn't file your tax returns? There's no time limit.
If you don't file a return the government normally makes up a "substitute" return for you--without any deductions--and will send you a bill for the tax along with interest and penalties. Ignoring your taxes doesn't make them go away--the bill just grows over time as interest and penalties mount up. The faster you face the music and get proper returns filed, the lower your tax bill will be.
Unpaid Back Taxes
Unpaid back taxes don't disappear by themselves. Although taxes can sometimes be reduced, or even eliminated, by filing a Chapter 7 Bankruptcy or persuading the IRS to accept an "Offer in Compromise" most taxpayers who fall behind will need to pay their tax bills over time. The IRS offers installment payment options but you must pay interest on the unpaid balance.