How Long Can I Delay Paying the IRS Without Getting into Trouble?

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We get it. No one likes to pay taxes, especially when you’re already facing economic hardship. But if you’re wondering how long you can avoid paying before you get in trouble with the IRS, it depends on how you define “trouble.” If you don’t pay your taxes on time, penalties and interest will begin to accrue immediately. If you don’t file your taxes, you’ll also face failure-to-file penalties. In extreme cases of tax avoidance, you could even face prison time.

Penalties will include:

  • Failure-to-file Penalty: Five percent of the balance due each month the return is late, up to 25%.
  • Late Payment Penalty: Five percent of the balance due each month or part of the month the payment is late, up to 25%.
  • Interest: Interest for late tax payments accrues daily, beginning on the day they’re late. The interest rate is the federal short-term interest rate plus three percent.

Interest and penalties for late tax payments can add up rapidly, so it’s a good idea to pay as soon as you can.

If you don’t pay at all, it won’t be long before the IRS sends you a letter demanding your taxes due in full. After that, they can issue a Notice of Federal Tax Lien letting your creditors know of their claims on your property and assets. Then, the IRS will send you a Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before issuing the levy against your property and assets, including your bank account, savings accounts, and your wages. In serious cases, you could face criminal charges for tax evasion.

Can’t Pay Your Taxes?

If you can’t pay your taxes right now, rather than ignoring them and avoiding payment, talk to a tax professional about setting up a short-term or long-term payment plan. In some cases, you may even qualify for an offer in compromise, where the IRS agrees to accept less than the full amount you owe. In cases of severe financial hardship, the IRS may even agree to suspend its collection efforts temporarily. While this won’t eliminate your debt, and you’ll still accrue interest, it can keep you out of jail for tax evasion.

If you can’t pay your taxes, or you need advice about payment plans, interest, and penalties, or guidance about an offer in compromise, it’s time to seek help from a trusted tax expert. Contact Highland Tax Group to get started.