Why the IRS Sends Notices
The IRS sends notices for several reasons. In many cases, the notice is simply requesting additional information or notifying you about a change to your tax return. Other notices may inform you that you owe taxes, penalties, or interest.
Common reasons taxpayers receive IRS notices include:
- Unpaid tax balances
- Errors on a tax return
- Missing tax returns
- Requests for additional documentation
- Notice of IRS collection actions
Regardless of the reason, it is important to read and understand the notice. Ignoring an IRS notice can allow the problem to grow more serious over time.
The IRS Will Continue Sending Additional Notices
If you ignore an IRS notice, the agency will typically send additional letters. These follow-up notices often become increasingly urgent and may warn that further action will be taken if the issue is not resolved.
For example, if you owe taxes, the IRS may send a series of collection notices. Each notice provides more information about the balance due and encourages you to contact the IRS or make arrangements to resolve the debt.
Ignoring these notices can eventually lead to enforcement actions by the IRS.
Penalties and Interest Will Continue to Increase
One of the most important reasons not to ignore an IRS notice is that tax debt does not remain static. When taxes go unpaid, the IRS typically adds penalties and interest to the balance.
Over time, these additional charges can significantly increase the amount owed. Even a relatively small tax debt can grow into a much larger financial burden if it is not addressed promptly.
Responding early may provide more options for resolving the situation before penalties and interest accumulate further.
The IRS May File a Federal Tax Lien
If a taxpayer continues to ignore IRS notices about unpaid taxes, the IRS may file a federal tax lien. A tax lien is a legal claim against your property to secure payment of the tax debt.
A federal tax lien can affect your financial life in several ways. It may:
- Damage your credit profile
- Make it difficult to obtain loans
- Attach to real estate or other assets
Once a lien is filed, resolving the underlying tax debt often becomes more complicated.
Wage Garnishment May Occur
If IRS notices continue to go unanswered, the agency may move forward with more aggressive collection actions. One of these actions is wage garnishment.
An IRS wage garnishment allows the government to take a portion of your paycheck directly from your employer. Unlike many other creditors, the IRS has broad authority to garnish wages for unpaid tax debt.
This can place a significant financial strain on taxpayers who are already struggling to manage their obligations.
The IRS Can Levy Your Bank Account
Another potential consequence of ignoring an IRS notice is a bank levy. A levy allows the IRS to freeze and potentially seize funds in your bank account.
If your bank account is levied, the funds may be held temporarily before being sent to the IRS to satisfy the tax debt. This can disrupt your ability to pay bills or access your own money.
Addressing IRS notices early can help reduce the likelihood of these collection actions.
Options May Still Be Available
Even if you have received multiple IRS notices, options may still exist to resolve the situation. The IRS offers several programs that may allow taxpayers to manage or reduce their tax debt.
Possible solutions may include:
- IRS installment agreements (payment plans)
- Offer in Compromise settlements
- Penalty abatement in certain situations
- Assistance with unfiled tax returns
The best option depends on the taxpayer’s individual circumstances, financial situation, and the nature of the tax issue.
Take IRS Notices Seriously
Ignoring an IRS notice can lead to escalating problems including penalties, tax liens, wage garnishments, and bank levies. Taking action early may provide more opportunities to resolve the issue and prevent more serious collection activity.
If you have received an IRS notice and are unsure how to respond, it may be helpful to learn about your options and take steps to address the situation before it becomes more difficult to resolve.
If you receive an IRS call or notice and need guidance, contact my office today to schedule a consultation.
