If you have accumulated IRS debt and up until now it has become a nightmare, you don't need to worry too much; what really matters is that you have an intention to pay. If that is the case, you could qualify for an online payment plan. This is basically a readjustment of your debt that will allow you to clear it more comfortably over time.
However, there is another reality that leads you to wonder: What happens if you don't pay the IRS? The truth is that some people have no underlying intention of settling their debts with the IRS, and this truly becomes a problem, as it is a decision that comes with quite serious consequences.
We will share some of these measures with you so you can get a clearer idea of what happens when someone stops filing taxes in the USA and does not make future commitments to settle those debts with the IRS.
What happens if you don't pay the IRS?: Notices will arrive in your mailbox
First of all, we remind you that the IRS stands for the Internal Revenue Service. Now then: what happens if you don't pay the IRS?
The first thing that will happen when IRS debts begin to accumulate is an increase in state mail notifications received from the IRS. Indeed, this approach is the first step the agency takes to press for payment.
These notifications will include information about the tax debt balance, as well as the penalties and fees that have been added due to non-payment. They may even inform you about the available means that offer guidance on how to negotiate a debt with the IRS. In reality, what this tax agency cares about most is that a payment agreement is reached and that the debt does not continue to accumulate.
I owe money to the IRS, IRS debts: ACS will be activated
If the first notices are not answered, then the IRS will add the delinquent taxpayer to the Automated Collection System, known as ACS. Basically, this is a tool used to collect back taxes within the system of filing taxes in the USA, and therefore it is the means through which bank accounts are levied, wages are garnished, and liens are issued on assets and properties based on existing IRS debts.
How to negotiate a debt with the IRS: Tax debt will begin to accrue interest
In the initial communications, the IRS provides information about the interest that will begin to apply to the debt until it is addressed and fully paid off. Keep in mind that the interest rate for IRS debts changes quarterly and is higher than 5% per year. This means that the amount will continue to grow monthly, as long as one continues to choose the inconvenient option of ignoring communications from the IRS.
Fines will be imposed by the IRS
Along with interest rates, there is another factor that causes the size of tax debt to grow rapidly over time. This element comes in the form of penalties, and currently, they hover around 0.5% for each month that passes and accumulates on top of the unpaid balances.
However, the situation changes when you have deliberately ignored all IRS notifications. If the person has not decided to set up any arrangement to settle that tax bill, then the penalties will increase to an additional 1% for each month of non-payment.
Everything changes when you enter into an installment payment plan for IRS debts, because while the penalties will continue, they will now be reduced to a 0.25% rate for each month. It is a good idea to also check the IRS tax brackets so you have an idea of what you need to pay back and know everything about how to pay the IRS.
Can I buy a house if I owe the IRS? Other complications with IRS debt
From this point on, everything becomes considerably more complicated, as the loss of future refunds due to an outstanding balance, potential wage garnishments, bank levies, and the seizure of property become an imminent reality with the IRS US taxes.
Federal benefits are also lost, such as the help and subsidies to pay for health insurance policies in the United States that are quoted within the Obamacare marketplace. There can even be liens on the sale of real estate or the revocation of your passport to prevent you from leaving the country. However, these are consequences for those who decide to avoid a payment agreement with the IRS and have not responded to any of the previous notifications.
Another disadvantage: you also cannot buy a house if you owe money to the IRS, unless you do it in cash, because no bank will lend you the money. And be careful, because if you do it in cash, that newly purchased property may be subject to seizure because I owe money to the IRS.
Therefore, we invite you to seek professional advice from a tax law specialist if these are your circumstances. Paying off your IRS debts is a priority if you want to maintain your financial security. It is also essential if you want to continue having the opportunity to access health insurance with Obamacare subsidies.
