You can’t just ignore your taxes and they will go away. Your first overdue payment might not seem like a […]
You can’t just ignore your taxes and they will go away.
Your first overdue payment might not seem like a big deal. Or you may simply not have the funds available to pay the tax bill. Sometimes, a notice can also be hard to read. But, over time, unpaid taxes can increase in the form of interest and penalties, collection letters can be sent out, and, ultimately, the IRS may take action to enforce the payment.
There’s no one answer to the question of how long is too long to not pay taxes in North Carolina. The answer depends on factors such as whether you filed a tax return, the amount of tax due, when the amount was assessed, and the taxing authority involved.
Not paying and not filing aren’t the same
A taxpayer who files a tax return but is unable to pay the full amount owed is in a different position than a taxpayer who doesn’t file at all.
If a return has been filed, the taxing authority has a record of the reported amount and can proceed to charge interest and penalties on the unpaid balance. But failure to file a return is a worse scenario. Visit this page to learn more. The taxing authority may calculate the tax due based on the income they have on record, and this may exclude items like deductions, expenses, or tax credits, which means they may not be paying the correct amount.
If you can’t pay the full amount, it’s better to file an accurate return and work out a plan to pay the difference.
What happens after taxes aren’t paid
Collection efforts may begin with mailed notices that increase in urgency as they remain unpaid. Time-sensitive deadlines may appear on the notices, and it’s important to understand that some actions are time sensitive and need to be taken within a set period.
Some consequences include:
- Interest and late-payment penalties
- Refunds offset against the tax liability
- Liens against real estate or other property
- Garnishments on wages or bank accounts
- Seizures of assets in more extreme cases
- Loss or suspension of professional licenses or other state or local requirements
If taxes are unpaid, that doesn’t mean that immediate collection will occur. The taxing authority will generally follow a process of notification and other internal procedures before they can impose more aggressive collection actions. But it’s important not to wait until a notice of levy or lien is issued. At that point, you may have fewer options available.
When the collection clock starts
Do taxes go away after a set number of years? Tax debts do have a statute of limitations for collection purposes – check https://www.investopedia.com/terms/b/back-taxes.asp for details, but the time periods are more complicated than just a specific number of years.
The relevant time period may be based on the date the tax was assessed rather than the date the return was filed or the date of the first missed payment.
Certain events can also suspend or otherwise extend the collection clock, including: an installment agreement in progress, an open bankruptcy case, a filing for an administrative appeal, an offer in compromise, and time spent outside the U.S.
The practitioner will look at the assessment date, all of the notice dates, and the due date printed on the latest notice. These dates could change the approach entirely.
Don’t assume an old balance isn’t collectible
An old tax debt might be more difficult for the agency to collect, but age doesn’t automatically mean it’s uncollectible. The balance may have already been reduced to a judgment or put under a lien, or the collection clock could be extended or suspended.
It may involve more than one year. An older balance might be close to expiring while a newer balance is still fully collectible. Don’t treat every notice as if it refers to the same debt; it can cause you to miss a deadline or make a payment decision that doesn’t suit your situation.
It’s not necessary; if you got a standard notice, you can pay in full right now. In that case, just check the amount and pay using an approved method, and keep a receipt. It’s more helpful when the balance is large, you’re getting more notices, or multiple years of tax returns are missing.
What if you can’t pay in full
Tax agencies may have arrangements for paying over time, but each has different eligibility requirements. Common options include an installment agreement, currently not collectible status, a request for penalty abatement, or an offer in compromise.
Before requesting an arrangement, collect the information that reflects your financial status. If you’re unsure which option applies to your situation, a tax attorney Charlotte NC can review your tax notices, financial information, and available options before you respond to the taxing authority:
- Most recent income documents
- Bank account statements and monthly expenses
- Copies of filed and unfiled returns
- Every notice about the balance
- Information on real estate, cars, businesses, and other assets
Don’t promise to pay more than you can afford without leaving enough room for new tax bills or regular expenses. A defaulted arrangement may resume collection activity and create additional problems.
Although federal and state taxes may originate on the same return, they are separate entities. A payment arrangement, appeal, or hardship determination with the IRS is not necessarily applicable to the North Carolina Department of Revenue.
Make sure you understand which agency a particular notice refers to, as well as the applicable tax year, account number, and how you can respond. If there are two outstanding balances, your records must be meticulously matched to ensure that payments are applied to the appropriate account.
If you file a joint return, both you and your spouse can be liable for the tax due, regardless of who actually made the money or controlled the finances.
There is sometimes innocent spouse relief or other forms of relief available, but the rules and timing can be strict.
Don’t wait for a later notice
The answer in practice is that you shouldn’t let unpaid taxes escalate into a collection problem. If you file late returns, review the accuracy of the stated balance, and respond within the deadlines, you may have more choices available.
Keep all tax notices in chronological order, note the latest deadline, and ask for a complete statement of the account before you decide on how to pay or settle.
