When the IRS believes that you owe money, they will begin the process of collection which can cause many issues for you.
Understanding the wide net that the IRS can cast when collecting taxes can make it easier for you to predict how your life will end up impacted by any tax bill.
Personal property
The IRS website discusses what actions the IRS can take when collecting back taxes. The IRS can file a federal lien against you if it believes that you owe taxes.
In essence, this will prevent you from selling assets without paying off the taxes that they say you owe. For example, if they put a lien on your house, it means that any profit you make from the house’s sale must first go to the IRS to pay off your tax debt. You then get any money left over.
The IRS can also file a levy. This allows them to seize and sell your items in order to satisfy your debt. This can apply to wages, social security benefits, bank accounts, cars and boats.
Bank accounts
Before resorting to the above tactics, however, the IRS will typically place a temporary hold on your bank accounts first.
This means that you cannot access the funds in those accounts until the IRS gives the bank a notice saying that they have released your funds. You thus cannot withdraw cash or pay bills until you satisfy your debts with the IRS.
Ignoring the IRS is a surefire way to end up in even hotter water, so it is important to take action quickly once you know there is a problem.