Here's What Happens When You Blow Off Your Tax Bill

As of late February, the average tax refund issued by the IRS in 2024 came to $3,213. But what if you're not due a refund on this year's taxes? What if you owe the IRS money instead?

There are different reasons why you may end up with a tax bill on your hands this year. A lot of people earned more money in their savings accounts last year than in previous years due to elevated interest rates. So if that happened to you and you took in a lot of interest income, you may now be looking at having to write the IRS a check.

Or maybe you decided to take on a side hustle in 2023 but you forgot to make estimated tax payments on your extra income. That could result in an underpayment on your part.

Having to write the IRS a check during tax season can be a big bummer. But what if you don't have the money to do so? You may be inclined to ignore the problem and hope it goes away. But if you do, you could end up facing serious financial consequences.

When you blow off your tax debt completely

If you owe the IRS money from 2023 and you don't submit that sum in full by April 15 -- this year's tax-filing deadline -- you'll face interest and penalties for each month (or partial month) that goes by without paying that debt. Over time, that can add up to a lot of money.

Furthermore, if you don't make any attempt to pay your tax bill, the IRS will eventually seek to garnish your wages. This doesn't mean the agency will get to take your entire paycheck, but it may get a portion of it.

Wage garnishment isn't something that happens right away. It's not like your paycheck will be garnished on May 1 if you don't make your tax payment by April 1. Rather, the IRS will send you notices about your overdue bill. Blow them off, and you could end up losing part of your paycheck.

You can pay off your tax debt over time

You may be blowing off your tax bill because you know you don't have the money to cover it. But that's not a good idea and could end up worsening your financial situation. A much better bet is to reach out to the IRS and ask to get onto an installment plan, which has you paying off your tax bill over time.

One option you may also be able to look at is an offer in compromise, which allows you to settle your tax debt for less than the full amount you owe. But the IRS tends to be pretty picky about agreeing to a reduction or elimination of one's tax obligation.

Usually, for this option to work, you'll need to prove that your tax bill really isn't payable (such as if you've sustained a career-ending injury) or that it will constitute a major financial hardship for you. So it's really not an option most people should bank on.

It's not a fun thing to have to pay the IRS money rather than get a refund. But if that's the situation you've landed in, don't blow off your tax bill and hope the IRS forgets about it. The IRS may have its flaws and limited resources, but it's very good at recouping money it's owed. So your best bet is to acknowledge your tax bill and make arrangements to pay it off gradually in a manner that works for you.