Help! I Owe Between 50k and 100k in Taxes. What Should I Do?

Couple receiving notice of 50k - 100k tax debt

If you owe the IRS between $50,000 and $100,000, the agency can seize your wages, home, car, and other possessions. The IRS will also add penalties and interest to your account, and the IRS may tell the State Department to take away your passport.

However, even at this level of tax debt, there are still several options for relief, including monthly payment plans. Do you owe between 50k and 100k in taxes? Call (404) 609-1300 or schedule a consultation with our experienced tax attorneys today.

In the meantime, read on to learn more about owing a large tax liability and your options for relief at different levels of tax debt.

Key Takeaways

  • Collection Actions – The IRS can file tax liens, take your tax refunds, garnish wages, and/or seize assets if you owe over 50k.
  • Loss of Passport: The IRS can take your passport if you owe over $62k.
  • Streamlined Installment Agreement: You can set up payments online without financial disclosure if you owe less than 50k.
  • Installment Agreement with Collection Information Statement: Setting up payments on more than 50k requires a financial disclosure.
  • Can’t afford to pay: Other relief options on up to 100k in tax debt include offers in compromise, partial payment installment agreements, and currently not collectible status, but the application process is lengthy.

What If I Owe the IRS $50,000

If you owe any amount of tax, you will incur penalties and interest on your account. The longer you wait to pay, the bigger your balance will get. Additionally, if you owe the IRS at least $10,000 in late taxes, the IRS can issue a federal tax lien. These are legal claims on your home, car, and other assets.

The agency is not required to tell you until after the lien is filed. In most cases, the procedure occurs automatically. If you don’t pay, the IRS may try to garnish your wages or seize your assets, but they must send you a notice first and give you a chance to appeal the levy.

Penalties if You Owe Over 50k

If you don’t pay your taxes, the IRS charges late penalties (if necessary, failure-to-file penalties), while interest also accrues on the balance.

Penalties and interest are typically assessed starting on the day the tax is due. The failure-to-pay penalty is 0.5% of the tax payable every month and climbs to 1% per month if you receive a Notice of Intent to Levy. This penalty can amount to up to 25% of the outstanding debt.

For example, if you owe $50,000, the penalty will be $250 or $500 every month and can accrue up to $12,500 in total additional penalties.

Interest will be charged on both the tax liability and the penalties, and it will compound. This means that interest will be added on top of interest. Even if you file an extension, the underpayment interest will still apply. The IRS interest rate is the Federal short-term rate plus 3%, and it adjusts quarterly.

Loss of Tax Refund

If you owe any amount to the IRS, they can use the Treasury Offset Program to seize your state and IRS tax refunds. Whether you owe $50,000, $100,000, or even a few hundred, the IRS will seize your tax refunds until your tax liability is paid in full.

Tax Collection Notices

Regardless of how much you owe, the IRS will send you various notices demanding payment and explaining the consequences of not paying. Here are the most common notices you may receive if you owe $50,000 or more.

  • CP14 – Balance due notice, typically the first to arrive. Notes penalties and interest.
  • CP501 – Second reminder of balance due. Shows additional penalties on your balance.
  • CP503 – Third reminder of balance due. Continues to note penalties and consequences.
  • CP504 – Explains that the IRS will seize your state tax refund and other assets.
  • LT11 – Intent to levy notice. The IRS will start seizing assets if you don’t respond in 30 days.

Although many notices say that the IRS plans to take your assets, the IRS can only take your assets if it notifies you of your right to a hearing with a 30-day deadline. However, the IRS doesn’t have to provide notice before taking your tax refunds, seizing certain government contractor payments, or certifying your debt to the State Department.

Resolution Options If You Owe $50,000

You may be eligible for a payment plan at this tax debt level.

Long-term installment plans let you stretch out your payments over 72 months (six years). If you owe $50,000 or less in combined tax, penalties, and interest and have filed all required returns, you can request an installment arrangement through the IRS Online Payment Agreement application.

If you owe over $50,000, you can send in a payment, and if it gets you below the $50,000 threshold, you can apply online. Getting your tax debt below $50,000 can also save you time. If you owe less than $50,000, you don’t have to provide the IRS with financial details when you set up a payment plan (except in the situations noted below), but you do have to provide financial details for most payment plans on over 50k in back taxes.

If you cannot pay off the bill within six years, you may be eligible for a longer payment plan as long as you pay off the full balance by the collection expiration date. However, to get approved, you will need to submit a collection information statement. If you’re unsure of the best payment plan option, contact a tax attorney to help you.

Depending on your personal finances, you may qualify to pay a reduced balance through the partial payment installment agreement. Basically, you make monthly payments until the IRS collection statute expires, and then, the IRS writes off the remaining amount.

How to Reduce Your 50K Tax Debt

In addition to payment plans, there are several ways that you could reduce your IRS bill. This includes:

  • Penalty relief: If this is your first tax penalty, you may be eligible for First Time Abatement. Even if you haven’t fully paid the tax on your return, you can request a First Time Abatement for a penalty. However, the failure-to-pay penalty will continue to accrue until the tax is fully paid. You can also request penalty abatement based on reasonable cause if your facts and circumstances demonstrate that the late filing or late payment of taxes was not willful or negligent.
  • Offer in compromise: If you prove that you are paying the very most you can afford (taking into account all of your income and assets), the IRS may agree to settle your bill for less than you owe.
  • Disputing your tax liability: In some cases, you can dispute your tax liability. For example, if your bill is from an audit and you disagree with the results, you may be able to appeal the audit.
  • Innocent spouse relief: Suppose the tax liability is due exclusively to your spouse’s actions without your knowledge. In that case, you may be able to get your name removed from the liability with Innocent Spouse Relief.
  • Offer based on doubt of liability: There are also offers in compromise based on doubt of liability. Contact a tax attorney immediately if you don’t think you owe the tax. It’s doable but difficult to dispute a tax liability, and working with a tax professional can ensure you take the best approach.
  • Bankruptcy: Filing for bankruptcy may help you with tax debt, but you should consult with a bankruptcy professional first. Generally, you can discharge taxes in bankruptcy only if they were personal income taxes assessed at least three years ago, although this can vary. When you file for bankruptcy, the courts order a stay that temporarily prevents all creditors (including the IRS) from conducting collection activities against you for a period of time.

I Owe the IRS $51,000 to $100,000

Owing over $50,000 in taxes can be daunting. If you fail to take action, the IRS can issue liens, penalties, and added interest. However, options still exist to lower your tax bill and spread payments out over time. Here is everything you need to know if you owe $50,000 to $100,000 in taxes.

What Can the IRS Do When I Owe $51,000 to $100,000?

If you owe more than $50,000, you may face all of the previously mentioned consequences, including penalties for late payment, loss of tax refunds, increased interest, and tax liens on your home. The IRS may also begin to cash in on those liens. This might include seizing your property or cars to pay off your debts and garnishing your wages.

Wage Garnishment

If the IRS levies your wages, a portion of each pay period will be sent to the IRS until you make other arrangements to pay your outstanding taxes or the amount owed is paid in full. A portion of your wages may be excluded from the levy, and the difference will be paid to you.

With the levy, the IRS distributes Publication 1494, which explains how to calculate the amount exempt from the levy to your employer. Your employer will give you three days to complete and return a Statement of Dependents and Filing Status. If you fail to return the statement within three days, your exempt amount is calculated as if you were married and filing separately with no dependents.

If you have multiple sources of income, the IRS may apportion the exemptions to just one of your income sources and seize 100% of the money coming in from your other jobs. Wage garnishment is a risk even if you owe less than $50,000, but it becomes increasingly relevant the more you owe.

Loss of Passport

In other circumstances, the IRS may also take action against your passport. Under the Fixing America’s Service Transportation (FAST) Act 2015, the IRS is required to notify the State Department of taxpayers verified as owing a seriously delinquent tax debt.

As of 2024, seriously delinquent tax debt is defined as an unpaid, legally enforceable federal tax bill of more than $62,000 (including penalties and interest) for an individual for whom a Notice of Federal Tax Lien has been filed or a levy has been issued.

If you are individually liable for tax debt (including penalties and interest) totaling more than $62,000 (note this number increases annually) and do not pay the amount owed or make alternate payment arrangements, the IRS may inform the State Department that your tax liability is seriously delinquent. As a result, after being notified of your substantially outstanding tax bill, the State Department will normally refuse to issue or renew your passport and may revoke it.

Once the IRS legitimately certifies your tax debt to the State Department, the only way to reverse the situation is to pay in full or set up a payment plan that satisfies the IRS. At this point, simply making a payment to get your tax debt under the seriously delinquent threshold will not save your passport. However, if you make a payment and get your debt below this level before the IRS contacts the State Department, you can avoid this situation.

Options if You Owe $51,000 to $100,000

You’ll have the same options as above with a higher tax debt, but the process will differ. If you owe over $50,000, you may still be eligible for an installment agreement, but you cannot apply online.

Instead, you must submit Form 9465 (Installment Agreement Request) and potentially Form 433-F (Collection Information Statement). The first form is the normal installment agreement application, and the second requires comprehensive financial information.

What If I Owe 50k to 100k but I Haven’t Filed?

If you haven’t filed a return but you anticipate that you will owe a significant tax bill when you file, you should contact a tax pro to help you. They can help you file a return that takes advantage of tax avoidance or tax planning strategies.

Unfortunately, if you don’t file, you can incur a failure to file a penalty of 5% per month, up to 25%. You may face this penalty if you file voluntarily, but you can also face it if the IRS issues a substitute for return to assess the taxes against you.

What if I Can’t Afford to Pay?

If you cannot afford a traditional installment agreement, a Partial Payment Installment arrangement (PPIA) or an Offer in Compromise (OIC) may be your best option.

PPIAs allow you to make lower monthly payments. However, if your financial situation changes, the IRS may request higher payments in the future. Every two years or so, the IRS looks at your finances to ensure you still qualify for this program.

With OICs, you make an offer for less than you owe to the IRS based on your assets, income, costs, and overall ability to pay. If the agency agrees, you can spread the payment over a maximum of 24 months.

Finally, if you are experiencing financial difficulties, you can apply for Currently Not Collectible (CNC) status. Qualifying for CNC status effectively halts any IRS collections, including any liens, levies, or wage garnishments that may be associated with it. To be eligible, you have to show that you are unable to repay your obligations while covering your basic living expenses.

Large Tax Debt FAQs

How Do I Avoid a Large Tax Bill?

One strategy to prevent owing a debt is to determine and modify the amount of tax deducted from your wages accurately. Review your withholding at the start of each year or if your circumstances change.

If you’re self-employed, try setting aside a portion of every payment to cover your tax bill so you don’t get behind. If you’re self-employed with unfiled tax returns, consider working with a tax attorney who can help you get caught up on the returns while also maximizing your deductions and keeping your tax bill as low as possible.

Can I Get a Guaranteed Installment Agreement?

Unfortunately, no. If you owe between $50,000 and $100,000, you do not qualify for a guaranteed installment agreement. These programs are for people who owe $10,000 or less, can pay off the debt in three years, and have a history of compliance. When you meet those criteria, you are guaranteed approval on a payment plan.

Can I Get a Streamlined Installment Agreement?

A streamlined agreement is where the IRS lets you set up payments without a financial disclosure. You can only get this if you owe less than $50,000 in assessed taxes, penalties, and interest. In some situations, you may owe more than $50,000 in tax, penalties, and interest but still qualify. You should consult with a tax attorney to see if you can qualify for this agreement.

What Should I Do if I Owe $100k or more?

Consider an OIC or PPIA to settle tax debt if you owe the IRS more than $100,000 in past taxes and can’t afford to pay. You can also request penalty relief.

Because penalties are calculated depending on the amount owed, they will be considerable if you owe more than $100,000. Getting relief can save you anywhere from a few hundred to $50,000 on this level of tax debt.

What is the IRS Collection Statute of Limitations?

The collection statute of limitations is the 10-year term in which the IRS has to collect any taxes owed to you. However, numerous factors can cause the collection statute to be extended, giving the IRS more time to collect what you owe.

For example, if you declare bankruptcy, request an offer in compromise (OIC), or have a pending payment agreement, the collection statute is extended because the IRS cannot collect your bill during these times.

Get Help With Your Tax Bill

The IRS will take your outstanding debt very seriously when you owe between $50,000 and $100,000 in taxes. The IRS can utilize a variety of aggressive collection techniques to recover past taxes, and if you do nothing, you may face liens, levies, asset seizures, and other severe consequences.

Thankfully, there are several ways to reduce your tax bill or spread payments out over time, including payment installment agreements and penalty relief.

If you are concerned about unfiled returns, past owed taxes, or a high tax bill, call us today at (404) 233-9800 or schedule a consultation to find out how our team at Wiggam Law can help put this tax stress behind you.

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