How Late Resolution Can Complicate a Tax Debt Case

Last updated on June 12, 2023

Even though it is not pleasurable to pay taxes or deal with a tax debt, procrastination only complicates a tax debt case. The IRS charges penalty and interest each month on the entire amount of unpaid taxes precisely to encourage taxpayers to pay or resolve their tax debt early. Moreover, postponing resolution also puts a taxpayer at the risk of collection actions by the IRS.

If the IRS places a lien or a levy on a property and/or asset of a taxpayer, then the taxpayer needs to immediately resolve the tax debt to get the lien or the levy removed. Moreover, to remove a lien, the taxpayer typically needs to pay the entire amount of tax debt. With limited amount of time, it becomes difficult to achieve the most beneficial resolution.

To avoid facing the aggressive collection actions of the IRS, taxpayers must begin resolution efforts after they receive the initial IRS notices regarding the payment of tax debt. At this time, taxpayers have enough time to reach a beneficial resolution.

Even though the statute of limitations, the time period under which the IRS can collect taxes, is 10 years, the IRS sometimes goes back decades to collect tax debt. There have been cases where the IRS has collected tax debt from the children or relatives of the debtor that passed away. That is why it is important to resolve tax debt as early as possible and remain in compliance.