When it’s time to file and pay your taxes to the IRS, it really is best to just get it done. As harsh and bizarre as it may sound, the IRS system is designed to make your life miserable if you don’t pay your taxes.

How it happens

It’s vital to remember that you need to both file your taxes and pay them. The consequences can be dire enough if you haven’t paid your taxes. But if you’re also failed to file them on time, there are consequences to throw on top of those, too. Penalty fees are in place for those who fail to file every source of income they have. This includes business salaries, home sales, Social Security benefits, alimony and dividends. Not filing them correctly will result in a penalty of 5% of the total tax owed.

The IRS will reach out to you first

The consequences of having an IRS tax debt can vary wildly from person to person. Invariably, however, you will be sent mail from them. They cannot legally take any other action unless they have mailed you.

To be fair to them, they will give you opportunities to get yourself in order. In addition to the mail-before-action policy, they’ll give you about two months to respond to them. Unfortunately, many people ignore these letters. No-one likes mail from the IRS; they’d rather throw it to one side and deal with it later. This is a mistake. You must respond to the IRS.

Consequences can range from basic to severe

Some of the consequences won’t sound too surprising. One of the milder consequences is the forfeiture of tax refunds. Let’s say you failed to file taxes correctly in 2015. But in 2016, you got your act together and filed them. You find that you’ve been overtaxed and are due a refund. You contact the IRS about it - and they decline to refund you. Why? Because of your mistake in 2015.

More severe consequences come in the form of the pursuit of your assets. The IRS can take money from your Social Security. They can notify your landlord, creditors and your employers and make moves to seize your property. Horror stories about jail time should be taken with a pinch of salt, however. Unless you’re a big-time criminal, the IRS are unlikely to try putting you in jail.

You can make steps to help resolve the issue at any time

If you’re truly stuck on making payments, then you need to take action. One option available to you is to speak to an independent advisor about tax debt settlement. A regular debt settlement company may not have the expertise to deal with the IRS (most debts are with non-government creditors). It’s important you talk to someone with the right experience.

Whatever you do, it’s best if you talk to the IRS at some point. Don’t just close them out, because help can also come from them. If they recognise your economic hardship, they may offer a hardship suspension. Ignoring them is one of the worst things you can do. IRS tax collectors operate under very few rules, and will be ruthless if they want to be. You can alleviate this by being open with them.

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