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What happens if you owe the IRS money and don’t pay

Year after year, some taxpayers end up owing more money because it accrues year over year with more debt. But what if you don’t or can’t pay? Well, in some cases they will use your assets to pay back the debt. The IRS can place a lien on your property and assets, which could later become a levy, to seize your property to pay the tax bill.

How a lien can be placed to pay for your debts

A federal tax lien is a legal claim by the government to pay for your tax bill. Once a claim is placed, they have access to your personal property including real estate, personal property, and financial assets to pay back your debt.

What you can do to prevent the IRS from taking your property

There are a few ways to pay back the IRS without them placing a lien or a levy against you. Here’s how to pay back debt:

 1. Start an installment agreement

This is a payment plan to pay back the IRS in regular intervals. This shows that you are serious about paying back the debt. The disadvantage of this is that the IRS can terminate the plan if you consistently don’t pay them back.

2. Request a short-term extension

Sometimes taxpayers need just a little more time to pay back the balance. When they do, they can request a 120-day extension. Taxpayers will not be penalized if they formally request an extension. There will be an increase, however, of .5% in interest per month on the amount.

3. Apply for a hardship extension

This can only happen if you can prove that the money you owe would cause hardship for you or your family. There are no costs or penalties for this, but there is an increase in interest in your payment.

4. Borrow from your 401(k)

You can pull from your 401(k) to pay for the debt, but it’s not recommended. There are other implications to this and small fees may be involved.

5. Use a debit/credit card

If it’s not an absurd amount, maybe it’s best to put it on a credit card. Don’t use a debit card unless you have the money ready to pay. Fees vary generally and double-check the interest for the card before you do this. It may be better for you to do an installment agreement with the IRS instead.

6. Get a personal loan

A loan from a family or friend could be the answer. Use your best judgment on this one.

At McCauley Law Offices, P.C., our lawyers will find a solution to your tax problems, no matter how complex your IRS issue is. View our services and contact us (or call 610-388-4474) to schedule a free consultation with one of our tax attorneys. View and purchase Gregory McCauley’s published work “TAXJAMS: Simple Solutions” on Amazon. From our office in Chester County, Pennsylvania, we find tax solutions for clients throughout the country.

McCauley Law Offices can help!

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