Frequently Asked Questions (FAQs)
Having unpaid taxes overdue creates a lot of questions. Do I need an attorney? Will the IRS take my house? These are valid questions. We answer them and more here. Read more to get the answers to your FAQs - unpaid taxes.
1. Can the IRS garnish my paycheck if I haven’t paid my taxes?
Yes. In fact, they use wage garnishments quite often to collect back taxes.
First, the employer receives a notice from the IRS. The notice tells your employer that you have back-tax debt. It also demands that they deduct a portion of your wages and send them to the IRS. Then the IRS applies the deducted wages to your back-tax debt.
The IRS keeps the wage garnishment in place until one of the three following events occurs:
1. You pay the back-tax balance in full,
2. The IRS agrees to an alternative method of payment,
3. The IRS removes the garnishment for another reason.
The IRS only garnishes a portion of your check. You keep a minimal portion to maintain your basic needs. You’ll receive a set amount of your wages, based on your filing status and the number of dependents you have. Then, the IRS applies the rest of your wages, including bonuses to your back-tax balance.
2. I’ll never be able to pay off my past tax balance. Will I ever be in good standing with the IRS again?
Probably. That is to say, the IRS has several programs designed to help you get caught up. It’s likely that you qualify for one or more of them. The Fresh Start Initiative is a collection of programs they designed to “help struggling taxpayers.”
The following is a sampling of programs available through the Fresh Start Initiative:
“To assist those most in need, a six-month grace period on failure-to-pay penalties will be made available to certain wage earners- and self-employed individuals,” says the IRS.
The IRS may let you make payments on the tax debt. Although, penalties and interest will continue to accrue. They offer a traditional installment agreement option. These are relatively easy to qualify for. Some taxpayers qualify for another kind of installment agreement. This installment agreement can lower your balance.
Offer in Compromise
Many taxpayers prefer to submit an offer in compromise. Taxpayers can settle their tax debt for less than they owe on this program. However, it’s not for everyone.
The IRS is to accepts offers in compromise when they believe it’s the most the taxpayer can pay. With this in mind, the IRS reviews the taxpayer’s income, real estate property, and other assets. If a taxpayer has a summer home, for example, they may require you to sell it to pay your tax debt.
3. I can’t pay my taxes. Should I file my tax returns anyway?
Yes. Filing your tax returns and paying your tax are two different things, albeit they have the same annual due date. Authorities can arrest you if you don’t file on time. That generally happens if they believe you were evading your taxes. But they can’t arrest you for being unable to afford them.
The IRS imposes a Failure-to-File penalty on taxpayers who don’t file by the deadline. It’s five percent of the unpaid tax due every month until you file that year’s tax return. This is more expensive than the Failure-to-Pay penalty. That penalty is .5 of the unpaid tax every month.
If you decide to file back-tax returns on your own, remember to apply the correct tax code. Regardless of the year you prepare the return, apply the tax laws in effect during the corresponding year. In other words, if you’re preparing your 2015 return in 2019, use the tax laws that were effective in 2015.
4. I have a large past due-tax balance. Can the IRS take my retirement?
Yes. But that’s not all. They can also dip into your social security benefits, IRA, 401k, railroad retirement benefits, military benefits, and civil service benefits. However, they can’t use money that you receive based on need. “If you receive Supplemental Security Income through the Social Security Administration because you are elderly,” says Zacks Investment Research, “the IRS cannot levy those payments.”
If you receive a Notice of Intent to Levy from the IRS, you have time to respond before they remove the money from your account. First the money is frozen for 21 days. Although the IRS doesn’t take it immediately, you’re unable to access it until they remove the freeze from your account. The IRS also notes, “Normally, the levy does not affect funds you add to your bank account after the date of the levy.”
5. Can the IRS take my house if I owe back taxes?
IRS Revenue Code 6321 says, “If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.”
While the IRS can stake a claim on your home and take your property, they don’t take that option lightly. In fact, they’re more likely to put a lien on your home. When the IRS has a lien on your home, it means that the IRS must receive funds that result from a financial transaction.
For example, a taxpayer owes $50,000 in back taxes and the IRS has a lien on the home. If he or she refinances the current loan and cashes out equity of $100,000, the first $50,000 must be sent to the IRS. Then the balance of the cash can go to the taxpayer.
In certain circumstances, the IRS will remove the lien to allow for a financial transaction of this kind. That is, if they’re confident that the taxpayer can pay their back taxes as a result. They may make an exception if the lien causes a hardship, as well.
6. Do I need a tax attorney if I haven’t paid my taxes?
Some cases call for a tax attorney. Others call for a tax professional. Generally, tax attorneys are appropriate for taxpayers who are being accused of something illegal. Tax attorneys are especially appropriate if a taxpayer is being accused of tax fraud or evasion. Tax professionals usually have no experience representing taxpayers in a court of law.
However, if you have another issue, a tax professional is a better fit. CPA’s that specialize in tax relief have special certifications, experience, and knowledge with most other tax issues. A CPA that specializes in tax is appropriate for taxpayers who need help with unfiled tax returns, offers in compromise, wage garnishments, levies, IRS negotiations, and much more.
If we haven’t answered your question here, we invite you to contact us at 800.518.8964. We’re happy to discuss your case with you, with no obligation to hire our firm and no strings attached. Our friendly tax relief experts are available to take your call seven days a week during the standard business hours, as well as evening hours. We’ll answer your questions and help you determine which options you qualify for.
Call us today and sleep better tonight!
 “26 U.S. Code § 6321 - Lien for Taxes.” Legal Information Institute, Legal Information Institute, 16 Aug. 1954, www.law.cornell.edu/uscode/text/26/6321.
 “Information About Bank Levies.” Internal Revenue Service, 21 June 2019, www.irs.gov/businesses/small-businesses-self-employed/information-about-bank-levies.
 “Information About Wage Levies.” Internal Revenue Service, 21 June 2019, www.irs.gov/businesses/small-businesses-self-employed/information-about-wage-levies.
 “IRS Offers New Penalty Relief and Expanded Installment Agreements to Taxpayers under Expanded Fresh Start Initiative.” Internal Revenue Service, 28 June 2019, www.irs.gov/newsroom/irs-offers-new-penalty-relief-and-expanded-installment-agreements-to-taxpayers-under-expanded-fresh-start-initiative.
 Longren, Trudie. “Can the IRS Garnish My Retirement Pay?” Finance, 7 Feb. 2017, finance.zacks.com/can-irs-garnish-retirement-pay-6062.html.
 “Understanding Penalties and Interest: Internal Revenue Service.” Understanding Penalties and Interest | Internal Revenue Service, 30 May 2019, www.irs.gov/businesses/small-businesses-self-employed/understanding-penalties-and-interest.