Which Consequences Come as Result of Unpaid Tax Debts?

Paying tax on time is important for many reasons. Not only is it ethical – money from the tax helps build roads, hospitals, and so on, but not paying tax comes with all kinds of consequences. Of course, it all depends on the circumstances.

The experience has shown that the government is particularly harsh to those who don’t even bother to file their taxes. Filing taxes is a way of showing the government that you care. The debtors who do it are usually in a better position than those who don’t. In fact, the penalty for failing to file taxes is in the range between 5 and 25 percent.

The government has a number of different options available to debtors in order to make the payments more bearable. However, sometimes, even the government’s help is not enough to solve the problem. If debtors are unable to pay the taxes on their own, the government will take certain debt-collecting measures.

Government’s Methods for Collecting the Debt

Although the government is willing to help the debtors find the easiest way to pay their dues, their main worry is obviously the money. The tax service will do all in their power to get what belongs to them. This is something that may even include a jail time for the person who fails to pay the tax debt. Of course, that happens very rarely.

The first thing they’ll do is send notices, thus warning the debtor about the unpaid tax. But, if this tactic fails to bring the results, the government will employ other methods. One of the most common methods is tax lien, which is applied to the property owned by the debtor. Basically, according to the law, the government has the first access to the property in case of unpaid taxes. In order to collect the tax debt, the government has the right to sell the property.

Property seizure seems like a pretty aggressive option, which is why the government usually decides on alternative debt-collecting methods. Bill consolidation, bank levy, and wage garnishment are commonly used. The latter option refers to making a deal with the debtor’s employer to get a percentage of each salary as a debt-paying installment.

Bank levy is a very similar method; the difference is that the government makes an agreement with the debtor’s bank. The funds earned by the debtor are then seized by the government and used to pay off the tax debt.

Solving the Problem Before It Even Happens

The key to avoiding the consequences that come with unpaid tax is to deal with the issue on time. Those who are unable to pay it right away need to notify the government’s tax service. The chances are that they will be able to work something out. Usually, the tax service is willing to allow the debtor to pay the tax in installments over several months. In some cases, that period can be as long as several years. In fact, showing the willingness to deal with unpaid tax seems to be the key to solving this problem.

Melissa Thompson

Melissa Thompson writes about a wide range of topics, revealing interesting things we didn’t know before. She is a freelance USA Today producer, and a Technorati contributor.