What If I Ignore IRS Notices: A Costly Mistake
Tax season can be a stressful time of year, especially if you’re faced with an unexpected tax bill. It’s not uncommon for individuals to receive notices from the Internal Revenue Service (IRS) that they’d rather avoid dealing with. However, ignoring IRS notices is a mistake that can have serious consequences. In this article, we’ll explore what can happen if you choose to ignore these notices and why it’s crucial to address them promptly.
The Importance of IRS Notices – Why They Should Not be Ignored
IRS notices are a way for the government to communicate with taxpayers about various issues related to their tax returns. These notices can cover a wide range of topics, including:
Tax Audits: If the IRS decides to audit your tax return, you’ll receive a notice informing you of the audit and requesting specific documentation or information. Do not ignore this notice or the IRS will move forward and assess taxes based upon disallowances due to you not responding to IRS communications.
Payment Reminders: If you owe taxes, the IRS will send notices to remind you of your outstanding balance, along with penalties and interest that may be accruing.
Errors or Discrepancies: Sometimes, the IRS notices are simply meant to inform you of errors or discrepancies on your tax return that need correction.
Proposed Changes: The IRS may propose changes to your tax return, which could result in additional taxes owed. The impact of not responding to the IRS is that the IRS will assess the changes and you will next receive an IRS notice with a balance due.
Identity Verification: You might receive a notice asking you to verify your identity to prevent identity theft or fraud.
Consequences of Ignoring IRS Notices
Ignoring IRS notices can lead to a series of escalating consequences that can significantly impact your financial stability and legal standing. Here are some of the potential repercussions:
1. Accruing Penalties and Interest
When you receive a notice about unpaid taxes, it’s essential to take it seriously. Ignoring it won’t make the problem go away. In fact, the IRS will continue to charge penalties and interest on the unpaid balance until it’s resolved. These penalties and interest can add up quickly, making your tax debt much larger than it was initially.
2. Tax Liens
If you still don’t address the issue after receiving multiple notices, the IRS may file a federal tax lien against your property. A tax lien is a legal claim on your assets, including your home, car, and bank accounts, to secure the payment of your tax debt. A tax lien can negatively affect your credit score and make it challenging to obtain loans or credit in the future.
3. Levies and Seizures – Be Sure to Respond to these IRS Notices Quickly
Ignoring IRS notices can also lead to more aggressive collection actions, such as bank levies and property seizures. If you don’t work out a payment plan or settle your tax debt, the IRS may seize your assets to satisfy the debt. This could mean losing your car, your home, or other valuable possessions.
4. Legal Action and Impact of Not Responding to IRS Correspondence
In extreme cases, the IRS may take legal action against you. This could result in a lawsuit to collect the unpaid taxes, which could lead to wage garnishments or the sale of your property to satisfy the debt.
5. Criminal Charges
While this is rare, it’s essential to note that in cases of intentional tax evasion, ignoring IRS notices can lead to criminal charges. Tax evasion is a serious offense that can result in fines and even imprisonment.
What You Should Do Instead – Do Not Ignore IRS Notices
Rather than ignoring IRS notices, it’s crucial to take the following steps when you receive one:
1. Open and Read the Notice
Don’t ignore the notice. Open it and read it carefully to understand the issue or request.
2. Verify the Notice’s Authenticity
Unfortunately, there are scams involving fake IRS notices. Make sure the notice is legitimate by checking for the IRS seal, a contact phone number, and an official address. If you’re unsure, contact the IRS directly.
3. Respond Promptly
If the notice requests specific actions, such as providing documentation or paying a tax bill, respond promptly. Ignoring the notice will only make matters worse.
4. Seek Tax Attorney Help
If you’re unsure how to address the notice or believe there may be errors, consider seeking tax attorney help. Tax attorneys can guide you through the process, ensuring you take the appropriate steps.
5. Set Up a Payment Plan to Avoid Outcome of Neglecting IRS Notices
If you can’t afford to pay the tax bill in full, contact the IRS to discuss setting up a payment plan. They may be willing to work with you to establish a reasonable repayment schedule. If the IRS won’t accept your payment plan request, start looking for a reputable tax attorney to avoid collection activity and to negotiate a tax resolution that the IRS will accept.
6. Appeal if Necessary
If you disagree with the IRS’s findings or proposed changes, you have the right to appeal. Follow the instructions in the notice to initiate the appeals process.
7. Stay Organized
Keep copies of all correspondence and documentation related to your tax issue. This will be helpful if you need to dispute any charges or penalties.
Ignoring IRS notices is a risky and costly mistake. The consequences can range from accruing penalties and interest to facing legal action and even criminal charges in extreme cases. Instead of burying your head in the sand when you receive an IRS notice, take it seriously, read it carefully, and follow the appropriate steps to address the issue. Seeking tax attorney help when needed can also make a significant difference in resolving tax problems and preventing further complications. Remember, when it comes to IRS notices, proactive engagement is key to protecting your financial well-being. Contact Delia Law for a complimentary consultation about your IRS notices and potential IRS tax help resolution options.