If you run afoul of the IRS you could lose your house and business, driving license, passport or even end up in jail. When you get a letter showing you owe them money it really is time to wake up and phone Defense Tax to avoid getting into trouble. In this article we will look at the scary powers the IRS has to recover your debts to them – and why you shouldn’t ignore their letters.
The IRS has some pretty extreme powers that it uses to go after the most delinquent taxpayer. While you should remember that most people don’t end up in such a state that they end up in jail or losing their homes for failing to pay the right amount of tax, it does pay to keep this in mind should you ask you either deliberately under-declare your tax return or try to hide from the IRS when they write to you demanding money.
Throwing You in Jail
Though you cannot end up in a ‘debtor’s prison’ these days, it is a felony to deliberately file your tax return in such a way to reduce your tax burden. In most cases we may overestimate our mileage or perhaps declare too great a proportion of our home telephone bill for business use – the IRS will give you a slap on the wrist for minor infractions.
Where you are deliberately hiding tens or hundreds of thousands of dollars of tax owed, be warned – you could be arrested, trialed before a federal judge and put in prison.
Taking your Home
In most cases people run into difficulty with their taxes because of genuine reasons. If you are not upfront and honest with the IRS – perhaps setting up an installment plan to repay your debt with them – they have the powers to send in private collection agents. If you have a $500,000 home and your tax debt is in that region? Pack your boxes as they are coming for it. The same applies to your business.
Passports and Driving Licenses
Under new laws if you owe the IRS more than $50,000 including penalties and interest, they have the power to inform the State Department you are a delinquent taxpayer and the State Department can revoke your passport. Not everyone travels abroad but in many states they also have the power to ask the state to revoke your driving license – this can be for as small as a $10,000 debt.
Bank Account Freezing
Another power the IRS has is the ability to freeze your bank account and take all the money from it. Every penny that goes into the bank account will end up being repaid against your tax bill. If they have a lien on your credit score you won’t be able to simply open a new bank account so you will be really stuck there.
More common – But Still Unpleasant – Powers Used
In this section we will look at some more commonly used powers that the IRS has to collect your debts.
The collection agents will seize your personal possessions up to the value of the money you owe the IRS. If it is $50,000 and you have a $50,000 car that could be taken away. This hasn’t been very successful – Business Insider reported in summer 2018, “The IRS assigned private collection agencies (PCAs) $920 million in “inactive tax receivables” — or outstanding tax payments. That means the PCAs got back just 0.7% of the money assigned, while the program to retain the collector cost over three times as much.”
These powers have been shown to be used against people who are often in genuine financial hardship. You don’t need to be a millionaire to get in trouble with the IRS. You also don’t have to be a millionaire to face up and negotiate with them through someone like Defense Tax.
Taking your Business
If you owe less than $5000 you’re able to avoid the IRS from seizing your business. Only $5,000!
The IRS can force your employer to pay them a large proportion of your income direct from your salary or Wage Garnishment. You can quit your job and even be rehired by the same employer to get them off your back but the IRS are pretty persistent when it comes to tax collection.
Tax liens are legal instruments that destroy your credit score by telling all future creditors that you are a delinquent taxpayer. These can show up on your credit score for up to seven years after they are removed – longer than a standard debt default for example. With a tax lien if you can get credit at all you will have to go ‘sub-prime’ with massive interest rates and punitive measures for late repayments.
You could end up with as much as a 40% interest demand added to your tax bill if not filed in time.
Offsetting over payments
Perhaps the mildest thing of all the IRS can do is to not repay you overpaid tax. That could be a few thousand dollars. Everyone likes a tax rebate – if your debt is small, then wiping that smile off your face is a mild yet rather more pleasant way of resolving your difficulties with them.
So what do I do?
You may well be reading this article having received a final demand from the IRS over a debt, or even better, could be expecting that letter now. Why is it better to be expecting that letter now than to actually receive it? You are in the position to get help at the earliest opportunity from a tax debt expert.
The sooner you get in touch with a tax debt expert such as Defense Tax the better. You could avoid any interest repayments or punitive measures taken against you in the first place simply by getting in touch with us and getting us to help you deal with the IRS Los Angeles. We can reduce your repayments and can even get your total tax debt reduced by as much as 93%. The nightmare scenarios we describe above just won’t happen! That said, we can help you at any stage you are in.