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What Happens If I Can’t Pay My Taxes?

Myles Leva Updated: June 27, 2023 • 6 min read
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Tax season is never too far away, especially if you’re worried that you won’t be able to pay your taxes. Not paying your taxes is illegal and has many negative consequences. Furthermore, the longer you go without paying them, the more trouble you’ll be in. Still, there’s no need to panic right away. The best thing you can do if you foresee financial difficulties leading up to April 15th is to start planning.

There are many options when dealing with the Internal Revenue Service (IRS), from extensions to tax relief services. The first thing you need to remember is that there’s no hiding from the IRS. For that reason, even if you can’t afford to pay your taxes, you should at least take the time to file them.

The Consequences of Not Paying Your Taxes


One consequence you may face is that of an IRS audit based on suspicious activity. If you thought that you could reduce your tax payment by underreporting your income or claiming an unusual number of deductions (such as charitable donations that equal the same amount as your reported salary), the IRS will likely audit you. If you fail to file your taxes, you could also see an IRS audit in your future.

An audit involves a  federal employee taking a close look at your personal financial information. The purpose of an IRS audit is to make sure that the figures you provided them with are correct. Not only is the process stressful and time-consuming, but you could end up needing to pay back taxes. You likely want to have someone on your side if you find yourself facing an audit. Many tax relief services by reputable companies, such as Victory Tax Lawyers, include audit representation.

Late Fees and Penalties

Failing to comply with IRS regulations can lead to several expenses. The longer it takes for you to cover these expenses, the more they’ll grow. If you wait too long, you’ll be faced with a financial Frankenstein that will make you miss the days when you were only worried about not being able to pay on time.

The IRS breaks down penalties into four categories:

  • Failure to file
  • Failure to pay
  • Failure to pay estimated tax
  • Dishonored checks

The first expense you’ll face for filing and paying late are upfront penalties. According to the IRS, if you fail to file your taxes by the deadline, you’ll be slapped with a “failure-to-pay” penalty. In some cases, failure to file can lead to fraud charges. You can be faced with the same kind of penalty if you file on time but fail to pay by the deadline. In this case, the penalty will be less severe than if you haven’t filed at all.

The IRS will stop charging you interest and penalties once your balance is paid off.  The IRS charges interest on underpaid balances and pays interest on overpaid balances. The exact interest rates change year-by-year, and underpaid balances are currently charged 5% of what is owed, which will be charged each month. There are ways to get your penalties waived, and this is a common service provided by tax relief companies.

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Lost Or Late Reimbursements & Tax Refunds

Failure to file and/or pay your taxes on time won’t only result in added expenses. There is also the chance that you won’t be able to receive your tax refunds and reimbursements if you don’t get an IRS file extension or fail to pay on time. In most cases, your tax reimbursements and refunds will simply be delayed. Still, you don’t want to play games with the IRS. Playing with them is similar to playing with fire; you are at risk of getting burnt.

Extreme Cases

In extreme cases, failing to file and pay taxes can lead to arrest and criminal charges. The longer you fail to comply with the IRS and the more severe your infractions are, the more risk you face. The IRS may garnish your wages before you even see your paycheck, levy your bank account, and place a lien on your property. These are not situations that anyone wants to face.

4 Things You Can Do

This all probably sounds a bit scary. However, don’t let fear get in the way of proactively solving your current problems. The key is not to panic and take the appropriate steps to prevent this from happening.

1. Make Sure You Still File

Even if you know you can’t pay, the IRS always appreciates citizens who report to them honestly. Complying with them as much as you can will save you from a bigger headache.

2. File For An Extension

The IRS allows you to file for an extension if you know you’ll have trouble making the first deadline. If you expect any complications in paying your taxes, an IRS file extension is the first thing you pursue. While filing an extension on the IRS website isn't very difficult, you can always turn to a tax relief company to walk you through it for additional help, should you need it.

3. Installment Plans

If you’ve filed for an extension but are still having difficulty paying your taxes, you can work out a plan with the IRS. First, you should fill out a 9465 form to ask for an installment plan if you don’t think you’ll be able to pay in full. Timing is important, but you can make this request even after filing for an extension.

Installment plans are the easiest way to lessen the financial burden of taxation. If you have any trouble with setting up a good installment plan, you can compare tax relief companies to ensure you get the best plan.


4. Tax Relief Services

Even after taking advantage of all the resources the IRS offers, sometimes we need extra help. It’s not an easy predicament to find yourself in, but there are tax relief services that specialize in helping people in your position. These companies are designed to help people in complicated tax circumstances and will know best how to help you repair your standing with the IRS.

Here are a few recommended tax relief services:

Victory Tax Law

Victory Tax Law is a law firm that specializes in tax law services. They offer several tax relief services to those who need help dealing with the IRS. Just a sampling of what tax relief services they can help you with include:

  • Tax controversy
  • Tax resolution
  • Tax litigation
  • Installment agreements
  • Tax liens
  • Tax levies
  • Tax preparation
  • Back taxes

They offer their support to individuals and corporate taxpayers alike. As a company that deals with the IRS daily, they know the ins and outs of America’s tax system. You can book a free consultation with them to find out what they can offer you.

<< Get started with a free consultation with Victory Tax Law >>

Anthem Tax Services

As an accredited tax services firm, Anthem Tax Services has helped many people with their taxes. They now offer their IRS tax relief services remotely, so you can work with them without even leaving your house. Here are some of the services they offer:

  • Tax relief
  • Tax preparation
  • Tax law
  • Tax resolution
  • Bookkeeping
  • Fresh start forgiveness
  • Offer in compromise

You can give them a call or contact them through their site. They’ll get back to you quickly to help you handle any tax concerns.

<< Contact Anthem Tax Services Now >>

Lessons For The Future

While there are no guarantees in life (apart from death and taxes), you can take steps to ensure your compliance with the IRS. You should take as many steps as necessary to make sure that you’re complying with their regulations.

The IRS offers many options for making the taxation process easier. If you have any problems paying taxes on time and in full, you should take them up on their offers. For example, you can apply for extensions, set up payment plans, and even request the removal of penalties and fees from your case.

If you’re having trouble following the confusing processes that IRS compliance brings, you can always contact professionals to better understand tax relief and how it may help you. You can look around for one of many tax relief providers, starting with the examples we listed, which are all accredited and rated A+ by the Better Business Bureau.

In any case, taxes are serious. However, when you know how to deal with them, everything becomes far less scary.

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Written by Myles Leva linkedin-icon

Myles has been covering trends in personal finance for years. He writes for a number of financial blogs, columns, and fintech startups. With extensive knowledge of business financing and the financial challenges of business owners and individuals, Myles puts his skills to use by providing engaging and useful information.