What Happens if You Don't Pay Your Taxes?

The IRS has three types of agents; you want to avoid the third

By David Levine | Last updated on January 27, 2023

What happens if you don’t pay your taxes?

“You are in a world of pain, basically,” says Kathleen M. Pakenham of Cooley LLP. “The IRS is one of the worst creditors out there, with enormous power to collect what they are owed.”

Two basic types of tax avoidance are: filing your tax returns but not paying, and not filing at all. “It’s better to file and not pay than to not file,” says Bernard S. Mark of Kestenbaum & Mark. “Failure to file can be a misdemeanor under federal law and a felony under New York State law. If you file and don’t pay, assuming it’s because you don’t have any money and are not intentionally avoiding it, you will just get a bill.”

In either case, the best recourse is to face the music, the attorneys say. “The worst thing to do is to ignore the IRS,” Mark says. “By ignoring notices, you waive some rights under the IRS code, and it will be difficult to defend.”

For those who fall in the first category—failure to file—coming forward will usually result in leniency, says Bryan C. Skarlatos of Kostelanetz & Fink. “A lot of people fall out of filing, and they are then afraid to come in from the cold. If you make a voluntary disclosure of past noncompliance, you can avoid criminal prosecution, and the IRS may or may not impose penalties.” He says that those who haven’t filed for just a year or two don’t need an attorney; an accountant can work with the tax service. “If you’ve been out of the system for several years, or if a large amount of income is due, that’s much more sensitive,” he says. “Then you need an attorney.”

For those who have filed but are delinquent in their payment of unpaid taxes, you can get square with the IRS simply by paying the tax bill, though there may be file penalties. “Most people can work through this themselves, and don’t necessarily need an attorney,” says solo practitioner Ahron H. Haspel. “There is nothing you can do about interest, so there is no sense arguing about it, but you may be able to argue about penalties.”

“If you don’t pay those bills, the notices become more and more threatening,” says Barbara T. Kaplan of Greenberg Traurig. “That will eventually lead in most cases to a notice of intention to file a lien, a notice of intention to file a levy and then an actual seizure of assets.” At that point, you need a tax attorney and a tax professional to help you sort through the tax preparation and payment options.

And if the IRS comes calling? “The IRS has three types of agents,” says Skarlatos. “The first is a revenue agent, who conducts civil audits. The second is a revenue officer, who collects taxes that have been determined to be due. The third and most sensitive is the special agent. They are special because they are criminal agents. They are only interested in putting people in jail. They have badges and guns.”

Of course, it’s best not to let things get to that point by paying the full amount of total tax due by the due date. “The IRS has tremendous power and authority to make your life miserable,” Kaplan says. “You have rights, but there are time limits, so you have to respond in time. The best thing to do is work with the IRS. Build credibility with them. If you say you’ll do something, get it done.”

If you want more information on this area of tax law, see our tax overview.

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