Taxpayers in the U.S. are required to file their tax returns and pay their taxes by the deadline each year, usually April 15. Unfortunately, failing to do so can lead to penalties and more severe collection actions by the IRS. Usually, however, you have time to act and get back in good standing before the IRS takes action, such as asset seizure or federal liens.
But how long before the IRS comes after you? And what situations would make the IRS come after you? This post walks through what you can expect in certain scenarios and the different IRS timelines so you’re prepared to make the right decision for your situation.
Key takeaways:
- Notices – The IRS will start sending you notices a month or two after you miss a tax deadline.
- Penalties and interest – If you don’t respond to notices for missed tax payments, you’ll continue to accrue penalties and interest.
- Tax liens and levies – After a few months or years, the IRS may eventually pursue federal tax liens and levies, which put your property at risk.
- Criminal charges – If you’re found to have engaged in tax evasion or tax fraud, the IRS could charge you with a criminal offense. Not being able to afford your taxes is not a crime.
- Tips for success – To avoid additional penalties and severe collection actions, never ignore a notice, follow tax regulations closely, and work with a tax expert to get your issue resolved.
How Long Before the IRS Comes After You for Unpaid Taxes?
When you don’t pay your taxes, the IRS acts pretty quickly. They’ll first try to collect what you owe with initial notices, such as a CP14 or CP501 notice. You can expect to get this in the mail within the first month or two after the missed deadline.
If you do nothing when you get these notices, the IRS will continue to escalate the penalties on your account and additional notices over the next six months to a year.
The IRS doesn’t always follow the same exact timing for every taxpayer. The timing of notices and further actions can depend on the amount of your outstanding tax balance, backups at the agency, and other factors.
However, if you ignore notices and fail to file or pay past-due taxes for several months or years, the IRS may decide to file a federal tax lien on your property. This is a public record that alerts your creditors that the IRS has an interest in your assets. The next step would be tax levies — or actual seizure of your assets.
These actions could be a reality if you do nothing after the IRS has sent you many notices and penalties regarding your tax compliance issues, but it won’t be the first step they take.
What If You Have Unfiled Tax Returns?
Actions for unfiled tax returns work differently than unpaid taxes. When you miss a filing deadline, the timing of the IRS’s actions will vary based on factors like:
- Whether you have other outstanding tax returns
- Whether you owe taxes for the missed tax return
- Whether you’re owed a refund for an unfiled return
The IRS will start sending notices and alerts about penalties when you miss a deadline. The agency may also decide to file a substitute for return (SFR) on your behalf when you don’t file. They’ll send you a Notice of Deficiency, which is CP3219N, that outlines their proposed assessment.
Remember that this amount will not include any credits or deductions you qualify for, so it’s usually higher than what you’d be billed if you file your own return. After getting the CP3219N notice, you have 90 days to petition the U.S. Tax Court. Otherwise, they’ll move forward with trying to collect what they assessed.
If you receive the proposed assessment and do nothing, you’ll then get a tax bill for that amount. If you continue to ignore notices and fail to pay what’s owed, the IRS may then file a lien or seize your assets or wages to cover the balance.
When the IRS Will Take Enforcement Action
If you pay your taxes and file your tax return on time, you generally won’t have to worry about the IRS contacting you or coming after you. The agency will take enforcement action if you get into one of these situations:
- You failed to file your required tax return: The tax return annual deadline is typically April 15 each year. If you’re required to file, you must do so by this date unless you ask for a six-month extension.
- You owe taxes and haven’t paid: Whether you’ve filed your tax return or not, you must pay by the deadline to avoid penalties and IRS action. This means paying taxes for the prior year by April 15 and paying estimated quarterly taxes, if necessary.
- You filed an inaccurate tax return: The IRS receives information about your income from other parties, such as employers, clients, and financial institutions. If your tax return doesn’t align with these documents when reporting your income, the IRS will contact you about the issue and may apply a penalty if you underreported your income.
You may not owe any taxes when you file, and you could get a refund. The IRS typically won’t do anything to contact you in this case unless it finds an error. In some cases where taxes go unpaid, the IRS may not prioritize taking action beyond penalties if the statute of limitations is going to run out. Always ask a tax expert if you’re unsure what the IRS will do in your situation.
When Does the IRS Impose Criminal Charges?
Most taxpayers will not have to deal with criminal charges from the IRS. However, there are cases where the agency may pursue these charges or very high civil penalties if your taxes continue to go unpaid or you repeatedly fail to file your past-due returns. This only happens if the IRS believes that a lack of tax compliance is tax evasion or tax fraud.
Even though these cases are very rare, you never want to ignore tax problems that could land you with charges. You could have to pay up to $100,000 in fines for felony tax evasion, not to mention get several years of prison time. If the IRS finds that you willfully failed to file, you could be charged with a misdemeanor, which could mean up to a year in jail or fines up to $25,000.
What’s the Statute of Limitations for IRS Collections?
In general, the statute of limitations for collections, or the collection statute expiration date (CSED), is 10 years from when the taxes were assessed. After this period passes, the IRS can no longer take collection actions for unpaid taxes or for accompanying penalties and interest.
Certain events pause the CSED, like applying for certain relief programs, bankruptcy stays, or appealing IRS decisions.
Other statutes of limitations related to taxes:
- Refund statute – You have three years from when you filed your return to claim a credit or refund or two years from when you paid the tax.
- Assessment statute – The IRS can only assess tax within three years after the tax return deadline, which includes extensions, or within three years of when the IRS received your return, whichever happens later.
- Extended assessment statute—The IRS typically only examines returns filed within the past three years when conducting an audit. However, if the tax is significantly understated, the agency can audit a return going back six years.
Understanding the CSED and other tax-related statutes of limitations helps you understand the IRS’s timing and your own rights when dealing with a tax issue. Talk to a tax expert when you need assistance filing your late return or negotiating with the IRS on unpaid taxes.
How Does the IRS Know About Unpaid Taxes or Returns?
The IRS has a few ways to uncover unfiled tax returns or unpaid taxes. Primarily, they’ll receive details from third parties, including employers, companies, and financial institutions, about the income you receive throughout the year. Sometimes, they may get notified by a state tax agency or discover your information through public records.
Once a discrepancy in your income is found, or the IRS believes you should have filed a return and you didn’t, they’ll start sending out notices and payment demands. If you ignore these notices and don’t take action quickly, you’ll have to deal with building penalties and interest and potential danger to your assets with liens and levies on your property. The IRS also may seize your passport or garnish your wages from employment.
How to Avoid or Resolve Tax Issues
The best way to avoid IRS fines, seizures, and criminal charges is to comply with tax laws. Here are steps to take to avoid problems or to resolve issues if you’ve missed a deadline or payment:
Pay Attention to Deadlines
Don’t miss tax deadlines, whether for quarterly taxes, annual tax return filing, or payment. If you receive a notice in the mail, respond appropriately within the given timeframe, i.e., 30 or 60 days. Following due dates and even filing or paying early will help you stay in good standing.
Apply for Relief
Many taxpayers fall behind on tax requirements because they fear they can’t afford their tax balance. If this is the case, you have options. Consider requesting one of these forms of relief:
- Installment agreement: Pay off what you owe in monthly installments instead of making one lump-sum payment with IRS payment plans. You can usually apply and get approved online using the IRS’s website.
- Tax filing extension: If you can’t file on time, ask for a six-month extension, which is fairly easy to get from the IRS. This gives you more time to file your return, though you still have to pay what you owe by the original tax deadline.
- Offer in compromise: If your financial situation doesn’t allow you to pay your full balance, you can request an offer in compromise, in which the IRS agrees to accept a lower amount to cover your tax debt.
- Show financial hardship: If you’re experiencing temporary financial hardship, ask the IRS to put your account into currently not collectible, or CNC, status. This means they won’t try to collect from you until your situation improves.
Never Ignore IRS Notices
Whatever you do, don’t ignore IRS notices. If you fail to file a return or pay taxes on time, doing nothing just means the IRS will continue to charge you with penalties and interest, and they may ramp up their efforts to include liens and levies on your property.
Act quickly to avoid more aggressive enforcement, always pay what you can, and try to come to an agreement with the IRS based on your situation. You’ll have more opportunities available to you if you act quickly and voluntarily.
Seek Help from a Tax Expert
As soon as you realize you made a mistake or receive a notice in the mail, contact a tax expert, like an attorney. These professionals understand tax law and your options for getting the issue resolved. You may need to correct a return, file a late return, pay taxes, request tax debt relief, file an appeal, or negotiate with the IRS. These actions are all easier with the help of a tax professional.
How Wiggam Law Can Help
It’s common to make tax mistakes, whether you miss a deadline for filing or fail to pay what you owe on time. Whatever issue you’re dealing with, the sooner you act, the better. Understanding how the IRS pursues collection helps you take care of the matter before these actions escalate, helping you avoid asset seizure or liens on your property.
Talk to the team at Wiggam Law right away for assistance. We will consult with you about your issue and walk you through your options for resolution.
Contact Wiggam Law today to work with a tax expert on unpaid taxes or unfiled returns. Schedule a consultation with our team or call us at (404) 233-9800.