What Happens If You Ignore the IRS?
Nobody enjoys paying taxes, and getting a letter from the IRS probably isn’t anyone’s idea of a good day. But as tempting as it may be to set that notice aside and deal with it later, repeatedly ignoring the IRS can make a tax problem much more difficult—and potentially more expensive—to resolve.
IRS notices generally don’t disappear on their own. If you owe taxes and fail to respond, penalties and interest can continue to add to your balance, and the IRS may eventually take steps to collect what you owe. Depending on the circumstances, that could mean tax liens, levies, or other collection actions. In more serious cases involving willful violations of tax law, criminal consequences may also be possible.
Key Takeaways
Ignoring the IRS can make your tax problem more expensive. Penalties and interest may continue to accrue while an unpaid tax balance remains unresolved.
The IRS has significant collection powers. If you don’t address your tax debt, the IRS may file a federal tax lien or levy wages, bank accounts, and certain other assets after following applicable collection procedures.
Responding early may give you more options. Even if you can’t pay your balance in full, you may be able to pursue an installment agreement, Offer in Compromise, temporary collection delay, or another resolution depending on your circumstances.
What Happens When You Ignore the IRS?
The IRS can’t simply take money from your bank account the moment you miss a tax payment. The agency must follow established collection procedures, which generally include assessing the tax, sending notices demanding payment, and providing certain taxpayer rights before taking specific enforced collection actions. For example, before most levies, the IRS must provide a Final Notice of Intent to Levy and an opportunity to request a hearing.
That process gives taxpayers opportunities to respond, dispute an incorrect balance, make payment arrangements, or explore other forms of tax relief.
However, that doesn’t mean ignoring IRS correspondence is harmless. While the collection process moves forward, your balance may continue to grow, notices may become increasingly urgent, and the IRS may eventually move from requesting voluntary payment to enforcing collection.
Here are some of the potential consequences.
Financial Penalties
One of the first consequences of leaving a tax problem unresolved is that it can become more expensive.
If you don’t pay your taxes by the due date, the IRS generally charges a failure-to-pay penalty. For individuals, this penalty is generally 0.5% of the unpaid tax for each month or part of a month the balance remains unpaid, up to 25%. Interest also accrues on unpaid taxes and generally compounds daily.
If you also failed to file a required tax return, you could face a separate failure-to-file penalty. This penalty is generally 5% of the unpaid tax for each month or partial month the return is late, up to 25%, although the calculation changes when failure-to-file and failure-to-pay penalties apply at the same time.
The longer you wait, the more difficult the balance may become to manage. That’s why filing required returns and addressing unpaid taxes as soon as possible can be important—even when you can’t afford to pay everything immediately.
Enforced Collections
When repeated notices don’t result in payment or another resolution, the IRS may eventually use its collection authority to recover the debt.
One consequence that can catch taxpayers by surprise is a tax refund offset. If you owe past-due federal taxes and are entitled to a federal tax refund in a later year, the IRS may apply some or all of that refund toward your outstanding tax debt instead of sending the money to you.
In certain situations, a state income tax refund may also be applied to unpaid federal tax debt through the Treasury Offset Program. This means that even if the tax debt is from a previous year, future refunds you were counting on could be redirected toward the balance until the debt is resolved.
The IRS may also use other collection tools, such as a federal tax lien. A federal tax lien is the government’s legal claim against your property when you fail to pay a tax debt. The IRS may also file a Notice of Federal Tax Lien, which publicly notifies creditors of its claim.
The IRS can also issue a tax levy, which is different from a lien. While a lien represents a legal claim against property, a levy allows the IRS to actually seize property or rights to property to satisfy a tax debt. Depending on the circumstances, a levy may reach assets or income such as:
- Wages
- Bank accounts
- Retirement accounts
- Certain government payments
- Accounts receivable
- Rental income
- Vehicles and other property
Before most levies occur, the IRS must satisfy specific notice requirements and generally provide an opportunity to request a Collection Due Process hearing. That’s another reason it’s important to open and respond to IRS correspondence—the notices you receive may contain important deadlines and information about your appeal rights.
Potential Criminal Charges
Receiving an IRS notice—or simply being unable to pay your taxes—does not automatically make your situation a criminal matter.
Most unpaid tax situations are handled through the civil collection process. Criminal exposure is generally associated with willful violations of federal tax law, rather than someone simply owing money and struggling to pay it.
For example, criminal penalties may potentially apply in cases involving conduct such as willful failure to file required returns, tax evasion, or making false statements. The IRS distinguishes this type of intentional noncompliance from ordinary mistakes or non-willful errors.
The important distinction is intent. Repeatedly failing to comply with filing requirements or deliberately taking steps to evade taxes can create a much more serious situation than simply having an unpaid balance.
If you’re concerned that your tax situation could involve potential criminal exposure, consider speaking with a qualified tax attorney before communicating with the IRS.
Frequently Asked Questions
Tips for Handling IRS Notices
An IRS letter can be intimidating, but ignoring it is rarely the best strategy. Taking a few basic steps can help you understand the issue and determine what to do next.
1. Verify the information is accurate
Read the entire notice and make sure the tax year, amount owed, payments, income information, and other details appear correct. The IRS itself recommends verifying the information contained in penalty notices before taking action.
If you disagree with the notice, don’t simply ignore it. Follow the instructions provided for disputing the issue and gather any documentation that supports your position.
2. Respond within the designated timeframe.
Pay close attention to any response dates listed on the notice. Certain IRS notices provide limited windows for requesting appeals or hearings, and missing those deadlines may affect the options available to you.
Even if you can’t resolve everything immediately, contacting the IRS or taking the requested action before the deadline can help prevent the situation from progressing unnecessarily.
3. Explore your repayment options.
Can’t afford to pay the entire balance? That doesn’t mean you should avoid the IRS.
Depending on your financial circumstances and eligibility, potential options may include an IRS installment agreement, Offer in Compromise, or temporary delay of collection due to financial hardship.
The most important thing is to take action. IRS tax problems tend to become more complicated when they’re left unresolved.
If you’ve been ignoring IRS notices or aren’t sure how to deal with your tax debt, Top Dog Tax Relief can help you understand your situation and explore available options for resolving it. Contact us today to see what your next step could be.