Trucking & Taxes – July 2021 » Land Line Media Magazine

When you owe the IRS, you are dealing with the largest collection agency there is.

Owing the IRS is not the end of world, but it will feel that way. We know it is scary and stressful. It can ruin your credit and, depending on your employer, your job. We have seen it many times over.

Debt never feels good, especially debt to the IRS. When you owe the IRS, interest accrues as well as additional penalties. It is overwhelming, especially with all the different penalties the IRS adds and then top it all off with interest. Then before you know it, what you owed suddenly evolves into an overwhelming burden.

Consequences of IRS tax debt

IRS actions on tax debt fall into three categories:

Interest and late payment penalties
Liens
Levies and wage garnishment

These actions allow the IRS to collect what is owed, and they can jeopardize your financial stability.

Interest and late payment penalties

The debt you owe the IRS will accrue interest until it is paid fully. The interest does compound daily. You may also have additional penalties, including late filing fees and late payment fees. As these fees are added to your debt, these also start accruing interest.

Tax lien

The IRS issues tax lien notices automatically if you do not pay your full tax liability within 10 days after the first notice. A tax lien from the IRS means that by law the IRS is entitled to receive funds resulting from the sale of your property before anyone else, including you.

Anything you own that is valuable can be subject to a lien, including jewelry, land, houses and cars.

The IRS can also file the lien publicly, which will let your creditors know that the IRS has first claim on any of your funds. If the IRS makes a public filing, the lien will be on your credit report until it is removed, which also can hurt your credit score. Liens are not removed until you have paid your entire tax liability, accrued interest, any penalties, and recording fees in full.

Tax levy

A tax levy allows the IRS to seize any assets in addition to property immediately to be used to pay your tax debt. Also, your future tax refunds will be garnished until your tax debt is gone.

The IRS can levy any and all bank accounts you have or ones that are linked to your social security number. They will take every dime you have to settle your tax debt. If self-employed, they can levy against contractor or vendor payments due to you as well. As an owner-operator, this means the IRS can levy your earnings from the carrier you are driving for and take 100% of the fee due to you. The IRS does not leave you anything to pay your bills.

If you are an employee, you may also have your wages garnished before you receive your paycheck. These garnishments can affect your ability to provide for yourself because the IRS does not leave much for you to live on.

When the IRS does a tax levy, it is to collect what you owe them and to get your attention.

What are the solutions?

While these consequences of owing taxes are very unpleasant, they are preventable. Here are tips to avoid or mitigate many of these issues:

Stay ahead of your taxes by paying your estimated taxes.
Pay what you can and talk to the IRS.
Seek tax help and relief.

If you have already started to deal with garnishments and penalties that are straining your finances, you can get help from tax professionals, such as enrolled agents. They are the professionals who can represent you before the IRS.

Enrolled agents specialize in helping people with tax debt by negotiating offers in compromise and installment agreements and by removing penalties and garnishments. Tax relief companies, such as Taxation Solutions Inc., offer a free consultation to review your situation, outline a plan, and give cost and time information.

If you are intimidated by the IRS or just want professional help, working with a trusted tax relief company can be beneficial.

Being aware of how the IRS can collect your tax debt and what you can do to prevent levies, liens, and interest will help you maintain control of your finances and stay financially secure for the future. LL

This article has been presented by TruckerTaxTools.com, a division of Taxation Solutions Inc., a company that has been providing income tax and bookkeeping services to the trucking industry for more than 20 years. If you would like further information, please contact them at 877-966-2477. Their website is TruckerTaxTools.com. This article does not give and is not intended to give specific accounting and/or tax advice as everyone’s tax situation is different. Please consult with an expert in trucking taxes.