Most of the time, when people think of consequences that result from neglecting to pay taxes, they automatically think of serious fines. While it is true that the issuing of fines is one of the first courses of action you can expect the IRS to take when you owe them money, there are a variety of other actions the IRS can take to collect any debts you owe. If you are not careful, the penalties can extend far beyond isolated charges for paying late or for failing to pay at all.
Here are three other ways the IRS can penalize you for neglecting to pay your taxes:
1. Interest Charges
Usually, when you think of IRS fines, you probably assume these are charges that are simply tacked onto whatever outstanding tax balance you owe. You can certainly experience late-pay or failure-to-pay fines on your tax bill, but the penalties are actually greater because the IRS has the right to also charge you interest on top of late fees. In short, the IRS charges you for the time it takes for you to pay what you owe. For example, the interest on your unpaid taxes compounds daily according to the due date of your return, and it continues to accumulate until the date you pay your taxes in full. Typically, the interest rate is the federal short-term rate (which is determined every three months) plus three percent.
2. Seize Any Upcoming Refunds
Regardless of whether or not you are eligible for any tax refunds when you file future taxes, if you still owe the IRS a balance of any kind, the agency withholds the right to seize those refunds due to you. If you neglect to pay what you owe when the next tax season rolls around, do not expect to see a check in the mail with your name on it until you have taken care of your existing financial commitment.
3. Lien or Levy Your Property
Another unpleasant way the IRS can take control over your money is by exercising power over your belongings. This is usually a taxpayer's biggest fear when it comes to experiencing trouble with the IRS. A lien allows the IRS to claim your real estate, car, or other property so that they may levy - or take it away - from you. In some cases, they can even take control over your bank accounts and your income, which is a huge reason you do not want to mess around with IRS debt.
Along with these consequences, the actions the IRS can take against you can affect everything from your credit score and your social security money to your overall financial future and current standing. Some individuals are even forced to go so far as to declare bankruptcy and serve jail time.
You can avoid these extreme circumstances and dodge the lesser consequences by ensuring you are handling your taxes correctly - and on time - from the beginning. Consult with a knowledgeable Cook County tax law attorney to protect your rights and make sure your tax-related finances are in shape. Call the Law Offices of Eric G. Zelazny today at 708-888-2299 for a special consultation.