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Federal tax debt: Now with more penalties?

Few people want to go through the experience of being notified of delinquent taxes by the Internal Revenue Service. Many of those who wind up in this situation might also be dealing with other financial issues, so tax debt would only add to existing anxieties.

Depending on how -- or if -- the situation is resolved, those who have tax debts may also be faced with penalties and fines levied by the IRS. Of course, these consequences may seem particularly onerous for people struggling financially. Soon, however, the federal government may be levying additional punishments for certain taxpayers.

Not long ago, a U.S. Senate committee approved a bill that would forbid people who are seriously delinquent on taxes from holding employment with the federal government. In essence, this means that federal employees could lose their job in the midst of trying to deal with back taxes. Reports indicate that existing law allows IRS employees to be fired if they have tax debts.

If it’s passed, the new law could be applied to federal employees who have a federal tax lien attached to their property. Accordingly, that is how "seriously delinquent" would be defined.

Even without this proposed law in mind, it's worth noting that it may be to the advantage of individuals to tackle a tax debt quickly. In other words, people may not want to delay action after receiving a notice of delinquency. By responding to IRS claims with well-thought-out action, it may be possible to reach a settlement that resolves the issue in a complete and fair manner.

Source: Government Executive, "Delinquent on Your Tax Bills? You Could Soon Get Fired," Eric Katz, May 21, 2014

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