If you are an individual who has unfiled and unpaid taxes from past years and the IRS has yet to inquire about the gap in your income tax information, it’s definitely best to go ahead and start the process of resolving it. Contact your local tax preparer today to find out what you can do to bring your taxes to a current state and eliminate any debt that it may have caused. This also applies to businesses and individuals who are current on their income tax filing but have an outstanding debt to the federal government.

Having gaps in your tax returns can trigger an audit from the IRS. The auditing process is basically a means for the IRS to further investigate your financial situation and asses whether or not your tax information and returns are being filed correctly. Failing to file your returns as mandated can can cause you to have to pay large amounts of back taxes once your returns are rectified and up to date. If an audit from the IRS results in you owing them money, your best option is to work with them and use the resources they provide to help resolve your debt. Contrary to popular belief, the IRS and federal government want to work with you in any way they can to help absolve the debt and help you get on with your life. They are often happy to help taxpayers negotiate payment plans and settlements to make the payment process easier on you.

If you make the decision to enter into a payment agreement with the IRS to resolve your tax debt, make sure you can follow through. Only agree to pay what you can actually handle because failing to make scheduled payments as negotiated can result in array of monetary penalties along with possible legal charges. Failing to file your tax returns,making payments late and making partial payment are all ways that will cause your debt to grow. All of these actions have penalties attached to them that will continue to grow unless you get back on track with your payments. Repetitive late payments can cause you to pay penalties and interest up to 50% monthly on the total of your debt, which can make catching up nearly impossible. Long term neglect of your tax debt and unpaid penalties on the other hand, can lead to possible criminal charges such as tax evasion, fraud and negligence all of which come with the possibility of jail time

Even though the IRS is almost always willing to work with you while you pay down your debt, they do have some very aggressive collection methods for those who choose to ignore their notifications or fail to make payments in full and on time. If you are in debt to the federal government and are shown to be uncooperative, they do have ways of collecting their money without your permission. Wage garnishments are one of the more common methods of this type of collection. This process involves the IRS contacting your employer and having them cut a certain percentage of your pay from each check and send it to them to apply to your debt. The IRS bases this percentage on the cost of living but this can still be a very devastating situation and can cause financial hardship you and your family. The government can by law garnish up to 80% of each check until your debt and penalties are paid off, so it’s definitely best to avoid this situation completely.

The IRS also has methods of collecting your unpaid debts by using liens and levies against your personal property and assets. Liens are placed against your tangible property (homes, cars, etc.) by the IRS and are used as collateral for your debt. It is basically a means of pressuring you into paying your debt down. Once a lien is placed on your property, the IRS will contact your creditors to notify them that in the event of sale of the property, the IRS is first in line to legally confiscate and collect these funds toward your debt. Liens are usually long term events and stay in place until all debts and penalties are paid off. A levy on the other hand serves as an asset seizure method that the government uses to try and collect some of the debt immediately. Levies are placed most often on things like bank accounts, life insurance policies and stock and other valuable assets. Most of these assets will be immediately liquidated and placed toward your debt. Fortunately there is a process that enables you to appeal a levy if you feel that you have been unfairly victimized but it doesn’t often work out in favor of the taxpayer.