Every time you look at your paystub and see how much is going to the government in taxes, it is frustrating. While your tax dollars fund many important programs such as military defense and social services, you may feel that you could put that money to better use. You may even be tempted to figure out ways to avoid paying taxes. However, there are some serious penalties involved when you don’t pay your taxes on time and in full.
Fines and Letters
When the Internal Revenue Service deems that you have failed to pay your full tax amount, the first notification is by an official letter. These letters will come regularly the longer you wait to pay. More importantly, the IRS is required to charge interest on your unpaid taxes, interest that compounds daily. In addition, the IRS assesses a penalty for non-payment and late payment of up to $250,000.
Garnish Wages and Access Bank Accounts
One of the ways the IRS can make you pay an unpaid tax bill is by garnishing your wages until the full amount plus interest and penalties is paid. This means that they can instruct your employer to send a portion of your pay directly to them. The tax money you owe will be taken from your paycheck, and depending on how much you owe, this can impact your day-to-day life, especially if you live paycheck to paycheck. Even a small reduction can make it difficult to cover basic needs. In addition, the IRS has the authority to take money directly from your bank accounts, and all your financial accounts are up for grabs.
Loss of Property
If you are unable to pay back taxes through financial accounts, the IRS is allowed to put a lien on your property. This includes any homes, vehicles or items of value you own. Having a lien means that the IRS has the first claim on that property. You cannot sell it without the proceeds going to pay the back taxes. The IRS may also choose to seize and sell your property in order to settle the debt. Unpaid taxes can result in the loss of your home.
Most of the time, unpaid taxes do not result in a prison sentence if you are simply unable to pay the tax amount. The primary goal of the IRS is to obtain funds, not punish citizens. It is a different story if you actively seek to avoid paying taxes or try to hide income. Prison may also be a penalty if you refuse to work with the IRS in paying back the taxes once you become aware of the issue. If you are convicted of tax evasion, the penalty can include a prison sentence of up to five years.
While paying taxes is not enjoyable, it is an important part of being a citizen. By paying taxes, you are playing an important part in helping the government do the jobs that are too big for any one person to handle. The penalties for failing to pay taxes are far worse than the inconvenience of paying them in the first place.
Here are a couple tax related articles:
- You Probably Spend More On Taxes Than Food and Clothing Combined
- Top 10 Places to Do Your Taxes Online