The IRS can issue you a warning if you owe back taxes, but what’s next? Fees, fines, and penalties? The short answer: Maybe. But the longer one may surprise you.
After the IRS has mailed you letters, issued tax liens, and tried other remedies to settle your bill, the tax agency may have more options to get you to pay.
Read on for what the IRS can and cannot do to get you to pay your outstanding taxes.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1) The IRS can take away your passport
Can the IRS really revoke your passport and get you stuck overseas? Well, no. The tax agency tells the U.S. Department of State (DOS) to revoke your passport. If you’re traveling, the DOS may issue a special passport to allow you to come home so you can pay your tax bill.
However, certain circumstances are required. For instance, the taxes owed must be:
- Unpaid federal tax debts (including penalties and interest), AND
- Worth more than $64,000 (adjusted annually for inflation).
Also, the IRS must have tried all other remedies to collect your debt, including issuing a levy (more on levies below).
Suppose you’ve fallen under hardship, like a federally declared disaster, or been a victim of tax-related identity theft — would your passport still be revoked due to unpaid taxes? Generally, no, but you may have to prove those situations happened to keep your travel plans intact.
2) The IRS can take part of your paycheck
The IRS can also ask your employer to withhold your wages if you owe an outstanding tax debt. The portion withheld depends on the standard deduction for the year and how many dependents you are allowed.
Remitted funds are sent to the IRS to pay off your tax debt, and the wage levy does not stop until:
- The levy is released.
- You paid all your overdue taxes.
- You make another plan with the IRS to pay back your tax owed.
3) IRS: Bank account levy
The IRS can remove funds from your bank account for owed balances. The tax agency will send out Letter 1058, Final Notice of Intent to Levy, before levying your bank account.
During an IRS bank levy:
- Funds in the account are frozen, meaning they are inaccessible to you.
- Your bank may charge you a $100 processing fee.
Any funds you deposit after the levy date are normally not frozen. However, you should contact the IRS for more information about your levy.
4) The IRS can take your house, car, boat, and other property
Though rare, the IRS can also take property to satisfy your tax obligations, including:
- Your home.
- Cars, trucks, boats, and other vehicles.
- Some types of land.
After the property is seized, the IRS auctions off the goods to pay your tax debt. If your obligation isn’t satisfied after the auction, you’ll still owe the difference between the sale price and your unpaid bill.
You could redeem your property before the sale by working with the IRS. But if you want your real estate back after the purchase, you may need to:
- Pay the winning bidder the purchase price plus interest at 20% per year, compounded daily.
- File an appeal (which you can do before the seizure as well).
5) IRS interest rates and penalties for underpayment
The IRS can also charge you fees, fines, and penalties if you are behind on tax (on top of some combination of the above).
The penalty for late filing your return is 5% of your tax due for each full or partial month you are late, plus any interest compounded daily.
For this tax filing season, the late payment interest rate is:
- 8% for tax year 2024.
- 7% for the first quarter of 2025.
The penalty balance will continue to rise until you reach 25% of your taxes owed.
How to pay taxes owed and IRS scams
Don’t wait to get started filing this tax season. You can reach the IRS for help via the IRS Interactive Tax Assistant or by calling the agency directly at 1-800-829-1040 with any tax questions.
You can also use your IRS Online Account to securely view your personal tax information and follow up on notices or balances due. If you think you’ll need to request a payment plan option, you may be able to do so online or by contacting the IRS. Also, don’t be afraid to ask a tax professional for additional assistance.
Finally, be on the alert for tax scams. The IRS will never:
- Threaten you with the police, immigration officers, or other law enforcement.
- Revoke your driver’s license, business license, or immigration status.
- Call and demand immediate payment via gift card, prepaid debit card, or wire transfer.
Related Content
- Ways to Pay the IRS if You Owe Taxes
- When Are Taxes Due in 2025? Tax Deadlines by Month
- States With 2025 IRS Tax Deadline Extensions
-
Five Reasons Why You Should Review Your Medicare Advantage Plan Before Open Enrollment EndsMedicare Advantage enrollees have until March 31 to make changes to their selections.
-
Hidden Costs That Are Draining Your Budget — and How to Stop ThemHere's a closer look at some of the most common financial drains and practical strategies to mitigate them.
-
Trump’s Plan to Eliminate Taxes on Social Security Forgets Your ChildrenSocial Security A new analysis reveals that the policy change would mainly benefit high-earning retirees or those close to retirement.
-
Kentucky Has a New 2025 Income Tax Rate: What to KnowState Tax Cuts to Kentucky income taxes come amid a tax refund delay. What it all means for you.
-
Early Tax Refund Options Could Trap Your CashTax Refunds Don’t be fooled into thinking you’re not getting a loan — because you really are.
-
New Iowa Income Tax Rate for 2025: What It Means for YouState Tax A new tax law lands Iowa among the top ten states with the lowest income tax rates.
-
First-Time Filing Taxes? Key Tax Tips to Know for 2025Tax Filing Preparing your IRS taxes for the first time may seem daunting, but here are some return preparation and filing tips to start.
-
Trump Admin. Kills Support for NYC Congestion Pricing: What It Means for YouState Policy The toll program enacted in January charges commuters $9 if they enter Manhattan’s lower district during peak hours.
-
Legislation Cracking Down on IRS Tax Refund Mail Theft AdvancesIRS A string of bipartisan measures targeting taxpayer refunds, rights, and protections move forward on Capitol Hill.
-
Why You May Owe More Tax Soon on Popular Employee BenefitsTax Law Workers could foot the tax bill for employer-provided benefits like parking, gyms, and meals.
