Did you know that millions of Americans fall behind on their taxes each year? When you go through hard times financially, it’s easy to put off paying your taxes until the deadline has passed. Unfortunately, there are many penalties for delinquency, so it’s important to either pay the taxes or attempt to qualify for non-collectible status. Here are a few things you should know before you apply.
Penalties for Delinquency
If you’re delinquent and don’t do anything to resolve your situation, penalties could be levied against you. Possible consequences for unpaid taxes include:
- Wage garnishment
- Tax lien
- Property seizure
- Bank levy
- Jail time
To avoid these penalties, it’s important to file your taxes on time, each year. When this isn’t possible for lack of funds, you may qualify for non-collectible status
Understanding Non-Collectible Status
Sometimes there are valid reasons for falling behind on taxes. That’s why the “non-collectible status” category was created. It’s a good option for people whose monthly expenses are higher than their gross monthly income. If this situation describes you, then you may want to see if you qualify.
If it’s determined that you qualify, it does not mean your debt is forgiven. Instead, it means your obligation to pay taxes is temporarily put on hold. Though you will not be required to pay taxes while you qualify for non-collectible status, interest and penalties will continue to accrue. Additionally, the IRS has the right to analyze your financial information later on to determine if you still qualify to file under this status.
Here are a few more details you should know about filing under this status:
- You can make voluntary payments toward your tax debt if you choose to, even while your file is still in non-collectible status.
- You can only file under this status temporarily, while you meet its qualifications.
- A federal tax lien will be filed if it hasn’t already been filed previously.
Although filing under this status won’t relieve you of your ultimate obligation to pay back taxes, it will relieve your financial burden temporarily. In the meantime, you should work to find more suitable employment or living situations that will allow you to meet your tax obligations going forward.
Find Out if You Qualify
Tax matters can be confusing for the average person, so don’t be concerned if you need help. Resolve Tax offers a variety of services designed to help you get in better standing with the IRS. To find out if you qualify for non-collectible status, call us or contact us through our online form today.