While a notice from the IRS in your mailbox is never good news, many overwhelmed citizens tend to ignore these tax bills completely in the hope that they will stop receiving mail from the IRS. While thousands are ignoring IRS tax bills, their tax problems aren’t disappearing. Ignoring a tax bill could trigger a series of escalating actions that may be more tiring to try and reverse once they have been initiated. Here is all that you need to know if you plan on ignoring a tax bill.
The first process: IRS assessment and final notice
The start of the IRS process entails a tax assessment, from your filed return or from the adjustment made by the IRS. When your tax is assessed, you’ll receive an initial bill showing what you owe, including penalties and interest. This bill specifies the due date for the payment and payment options.
Ignoring the first notice from the IRS would lead to several additional notices being sent to you, each one more pressing and urgent than the last. The final notice sent by the IRS will read, “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” This final notice serves as legal warning that warrants immediate action before the IRS begins enforced collection.
The second process: IRS collection actions
If you are still ignoring the IRS after you received your final notice, your case gets handed over to IRS Collection. From here, the government can use one of several tools to collect the money you owe:
- Seizing your future tax refunds: Any future refunds due to you will automatically be issued to your debt.
- Filing a federal tax lien: This refers to a public notice that states the IRS has a legal claim to your assets, including any property that you own. This could damage your credit score making it harder for you to sell your home.
- Levying your assets: This is a more serious option where the IRS can seize your wages, bank accounts and retirement income. A final warning, the Notice of Intent to Levy is received before this happens.
- Passport restrictions: The IRS can also revoke your passport or deny a renewal on your passport if your tax debt is seen as “seriously delinquent”.
Some cases are handed over by the IRS to a private debt collection firm. Should this be the case, you will be notified by the IRS with the security details of the private debt collection firm, so you know it is legitimate.
Ignoring tax audits may also have consequences
Even when it comes to tax audits that were mailed, you need to ensure that you respond. The IRS assumes the worst when you ignore audit notices. The IRS will adjust your return, remove deductions, add unreported income, and assess more tax. The final step is the arrival of a 90-day letter. If you choose to ignore the letter, your right to dispute your tax disappears and tax collections begin.
Not filing your tax returns by the deadline, is not a way to put the tax notices to rest, but one that will lead to more penalties.
Ways to prevent IRS collection
For those who owe taxes but cannot pay right away, you can work with the IRS by communicating your situation to them.
- When your IRS bill is incorrect: Reach out to the IRS to address the mistake or rope in a tax professional.
- If the bill is correct, but you cannot pay: Consider options like installment agreements, offer in compromise and not collectible status. It is best to be upfront of your situation than ignore a tax notice completely.
You must remember the IRS offers many chances to settle a tax matter before taking aggressive action, however, the IRS will be forced to take action if you continue to ignore a tax bill.
