What to Expect If You Owe the IRS Over $100,000

Owing money to the IRS can be extremely stressful, but the situation is even more stressful when you owe into the six figures. When you owe this level of tax debt, you may be worried that the IRS is going to come after you, and there’s a pretty significant possibility of that happening.

Even if the IRS doesn’t contact you right away, the agency will eventually do everything possible to collect that money. The IRS can take very severe collection actions against people who don’t pay their taxes. However, if you reach out proactively, you should be able to make payment arrangements on your account.

To get help now, contact us at the Timothy S. Hart Law Group, P.C. We have helped many clients who owe $100,000 or more to the IRS or the New York State Department of Taxation and Finance. We will leverage our experience to help you get the best resolution possible while also customizing a solution that works for your unique financial and personal situation. In the meantime, here’s an overview of what to expect and your relief options.

What Will the IRS Do If You Owe Over $100,000?

If you owe over $100,000, the IRS can take the following actions:

• File a tax lien — Usually, this happens when you owe over $10,000, but the agency can issue a tax lien any time you get behind.
• Take your tax refund — If you file a tax return that shows a refund when you owe back taxes, the IRS will keep the refund and apply it to your bill.
• Levy your bank accounts — The IRS can seize all the funds in your bank account, up to the amount of your tax debt plus collection costs, but it will send you a notice before doing so.
• Garnish your wages — If you don’t resolve your tax bill, the IRS can garnish all but a very small amount of your paycheck.
• Seize your real or personal assets — If the IRS sends you a Notice of Intent to Levy, it can seize your assets if you don’t respond within 30 days.
• Tell the State Department to revoke your passport — As of 2023, if you owe $59,000 or more, the IRS can direct the State Department to cancel, revoke, deny, or not renew your passport. This number increases every year for inflation.
• Assign a revenue officer to your account — At first, all delinquent tax accounts are in the automated system, but if you owe this level of money, the IRS will usually assign a revenue officer to your case. They will be personally focused on collecting the tax debt from you.

The IRS doesn’t have to send you advance notice if it issues a tax lien or takes your tax refund. Before taking your bank accounts, wages, or other assets, however, the agency must send you a notice at least 30 days in advance. Usually, if the agency certifies your debt to the State Department, it will send you a notice that gives you 90 days to rectify the issue.

Resolution Options If You Owe Over $100,000 to the IRS

The great news is that you can avoid most of the above issues by setting up payment arrangements with the IRS. Whenever possible, you should pay in full, but otherwise, here are the main options:

Monthly payment plan

You can apply for a payment plan by filing Form 9465 (Installment Agreement Request) and Form 433-F (Collection Information Statement). Form 433-F is a detailed financial statement, and if you want to avoid sharing this information, make a payment to get your tax debt under $50,000. Then, you should be able to set up a payment plan without providing financial information. Note that you need to make the payment before filing Form 9465.

Monthly payment plan for business taxes

If you owe business taxes (such as payroll taxes), you may still be able to set up a payment plan, but the IRS’s rules are different for businesses. If your business has closed, you can theoretically set up a payment plan for any amount of tax debt. If you’re still in operation, you need to make a payment to get your tax debt under $25,000, and then you must pay off the remaining amount within two years.

Offer in compromise

An offer in compromise is when you tell the IRS about your financial situation, and then the IRS reduces your tax bill to a lump sum payment you can afford. Although the application process is primarily based on numbers, some subjectivity is involved with how you present all of the details. For the best results, you should have a tax attorney help you navigate this process — especially when you owe over $100,000.

Currently Not Collectible

If you cannot afford to pay your tax debt, you can request currently not collectible status with the IRS. Then, the IRS will pause collections for about two years before revisiting your situation again. To qualify for this status, you usually have to prove that you can’t afford to make monthly payments and that you don’t have assets to liquidate to cover the tax bill.

Penalty Abatement

On its own, penalty abatement will not help you resolve your tax debt, but it can greatly help to reduce your tax debt. The IRS assesses penalties for paying and filing late, and it also assesses penalties for errors discovered during audits. Generally, the penalties are based on a percentage of your tax balance, and they can get very high.

For example, say that you owe $80,000 and you pay over a year late. In this case, your late payment penalty can get up to $20,000. That brings your balance to $100,000. Other penalties and interest will make the amount due even higher. You should always ask for penalty abatement because the worst that can happen is that the IRS will say no, but if the IRS accepts your request, it can substantially reduce your balance.

What If Your Tax Due Is From an Audit?

What if you owe $100,000 or more from an audit? Then, you can still request a payment plan or apply for an offer in compromise, but if relevant, you may want to appeal the audit results.

Regardless of how much you owe, you can appeal if you disagree with the audit results. When the audit concludes, the auditor will send you a proposed assessment. If you disagree with the changes proposed to your return, you should file Form 12203 (Request for Appeals Review). You should also submit documents to back up your position.

The audit appeals process can be very complicated. It also requires strong knowledge of the tax code. You may want to work with a tax attorney with audit experience before taking this route.

What If You Owe $100,000 or More to New York State

If you owe taxes to New York State, the Department of Taxation and Finance can issue a tax warrant, garnish your wages, and seize your assets. The NY DTF can also rescind your business license and prevent you from operating.

In addition, the Department publishes a list of the 250 businesses and 250 individuals with the highest amount of delinquent state taxes. At the time of writing, there are several individuals on the list who owe less than $100,000 in state income tax, but they usually have business tax debts from LLCs that are significantly more than this amount.

FAQs

When people contact us for help, they often have a lot of different questions. Here are some of the most frequently asked questions.

Will the IRS take your house if you owe over $100,000?

The IRS technically has the right to take your home if you don’t pay your taxes, but the IRS rarely does this. However, the IRS may take your other real estate, such as vacation homes, rental properties, or commercial properties.

Can the IRS take your passport if you owe over $100,000?

The IRS can tell the State Department to take your passport if you owe over $100,000. As of 2023, the IRS will notify the State Department if you owe over $59,000. This number increases annually with inflation. By setting up a payment arrangement, you can avoid losing your passport.

Will I go to jail if I owe over $100,000?

You don’t have to worry about jail time just for owing over $100,000. However, if you owe this amount due to criminal tax evasion, the IRS can bring criminal charges against you. Luckily, this is rare. Usually, the agency only pursues civil penalties for tax evasion.

What if I owe the IRS over $100,000 due to my spouse?

If the tax debt is due exclusively to your spouse, you can apply for innocent spouse relief. If you’re approved, the IRS will separate your tax liability from your spouse, ex-spouse, or late spouse. Then, you’ll only need to pay the portion of the taxes related to your income.

Usually, to qualify, you must prove that you didn’t know about the tax liability and had no reason to know. The IRS asks detailed questions about your financial knowledge and involvement with household finances to discover your degree of involvement.

How to Get Help

To get help with your tax debt, contact us at the Timothy S. Hart Law Group, P.C. today. We focus on tax resolution, audits, and back taxes, and we have worked with many individuals and businesses that owe six figures in taxes.

When you contact us, we’ll talk about your situation. Then, we’ll map out a resolution plan that takes your budget and your unique preferences into account. Finally, we’ll turn the plan into action and help you get the IRS or the state off your back.