What Happens if I Don't Pay My Tax Bill?

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KEY POINTS

  • The IRS can come after your wages if you ignore an unpaid tax bill.
  • You can set up an installment plan and pay your taxes over time if you can't tackle your full bill at once.


Not paying the IRS could lead to some pretty severe consequences.

Most people who file a tax return end up getting a refund from the IRS. But what if you're in the opposite scenario and owe money?

There are different reasons why that might be the case. First of all, the process of taxing wages is imperfect, so even if you're spot-on when filling out your tax forms at work, you could still end up with an underpayment on your hands. Plus, if you earn money from a side hustle you don't pay taxes on as you go, or you make a lot of money selling investments in a brokerage account, you could end up owing the IRS the following year.

Either way, if you're sitting on a large tax bill right now that you don't have the ability to pay off, it's important to not ignore the problem and hope the IRS will just forget about that debt. (Spoiler alert -- that's not going to happen.) If you let an unpaid tax bill sit for too long, severe repercussions could ensue.

When the IRS comes after your paycheck

The IRS does not take kindly to unpaid tax debts. If you owe money and don't pay, the IRS will send you a notice asking for its money. If you ignore that first notice, you'll get another notice.

After several notices, the IRS will send you a letter warning that you face having your wages garnished. If you don't act at that point, the IRS will have the right to garnish a portion of your earnings in an effort to get repaid, and your employer will have no choice but to comply with that directive.

Now to be clear, the IRS won't garnish your entire paycheck. You need to be left with a certain amount of money to live on. But the IRS could end up garnishing a large portion of your paycheck, putting you in a tough financial spot.

Don't reach the point of wage garnishment

The IRS won't simply garnish your wages because you're a few weeks late in paying your tax bill. But if you ignore a series of notices asking you to pay, then that consequence could ensue.

To avoid that, reach out to the IRS and ask to get on an installment plan if you can't pay your tax debt in full. The IRS is generally pretty good about working with taxpayers to tackle their debts over time, so there's a good chance you'll be able to come to an agreement that works for you.

As long as you stick to the terms of your installment agreement, you won't be considered delinquent on your tax bill. And that means the IRS will not attempt to garnish your wages.

Now you will still incur interest and penalties on your tax debt if you carry it for months or years before it's paid off in full. The only way to avoid that is to pay the IRS everything you owe by the tax-filing deadline, which is April 18 this year. But accruing some interest and penalties is better than having the IRS nab a chunk of your paycheck every month.

Be proactive

It's easy to regard the IRS as an evil agency whose goal is to take all of your money. But actually, the IRS is pretty reasonable when it comes to people who owe taxes and can't pay in full. As long as you reach out and get on an installment plan, you won't have to lie awake at night worrying the IRS is going to come after your wages.

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