Here’s What Happens If You Don’t Pay Your Taxes

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The consequences could be pretty severe. 

Many Americans are used to getting a tax refund every year. And in 2022, the average tax refund issued came to $3,121.

But not everyone who files a tax return gets a refund. You may end up owing the IRS money for different reasons, such as being self-employed and not having paid enough estimated taxes, or having made a lot of money in a taxable brokerage account.

Now if you’re able to pay your IRS bill on the spot, great. Doing so will help you avoid interest and penalties on the sum you owe.

But many people don’t have money just sitting around in a savings account they can use to pay the IRS when a surprise bill arrives. And if that’s the boat you’re in, you may be inclined to ignore the problem of owing money on your taxes and hope it goes away. That, however, is a move that’s highly unlikely to work out well for you.

Don’t ignore a tax bill

When you don’t pay your taxes, you accrue interest and penalties on the sum you owe. But that’s not all.

Not getting paid doesn’t tend to sit well with the IRS. So after a while, the agency is apt to reach out to you asking for its money.

You’ll usually get several notices in the mail from the IRS asking you to pay your tax bill, or reach out to get on a payment plan if you don’t have the cash to cover your tax bill in full. If you ignore those letters, the IRS will eventually send you a notice letting you know that your wages are about to be garnished. And if you ignore that notice, you can expect the IRS to start coming after your paycheck.

Now this doesn’t mean that the IRS will take all of your money. The agency recognizes that you need money to live on. But can the IRS garnish a significant portion of your wages until you’ve made good on your tax bill? Absolutely. And that’s not a situation you want to end up in.

Don’t let things escalate

Reaching the point of having your wages garnished makes little sense when the IRS is actually pretty flexible about getting paid back. If you have a tax bill you can’t cover in full, reach out and get onto an installment plan. That way, you can pay off your tax debt over time.

In that scenario, you’ll continue to accrue interest and penalties on the sum you owe. But if you’re compliant and stick to your agreement, the IRS won’t attempt to go after your wages.

You can also consider charging your IRS bill on a credit card and simply paying that balance off over time. Granted, this isn’t necessarily the best move, since it could mean getting charged a fee for using a credit card plus having to pay an exorbitant amount of interest on your balance itself. But if you have a 0% interest rate on your card for a pretty generous period of time, it’s an option you can look at.

Either way, you’ll need to come up with a game plan for paying the IRS the taxes you owe. If you don’t, the consequences could be quite severe.

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