First Person: Ignoring an IRS Tax Bill? Not a Good Idea

If you ever wonder why old timers shake and tremble at the mere mention of the IRS, it's because the Feds are the most ruthless creditors a person will ever encounter, far worse than credit card companies and mortgage companies combined. Eventually those guys do go away. The IRS, however, isn't so forgiving.

Back in the 1980s, I went through a divorce. Like other divorced couples, the ex and I divvied up all our community debt with the judge, splitting the tax bill for the year right down the center. I paid my half, the ex didn't. And in just over two years his portion of the tax debt swelled up to nearly $5,000 in penalties, late fees, and compounding interest. Did I ignore the monthly statements from the IRS? Y'betcha. After all, I had a divorce degree that clearly split the bill in half and my half had been paid.

What happens when a tax bill is ignored

Unfortunately the IRS doesn't care about divorce settlements and who is supposed to pay what. When it comes to collection, they will pursue both parties. Since I was the one with a job, a bank account, and a new husband, the IRS came after me.

-- When it comes to collecting a past due debt, the IRS starts the collection action by first filing a Notice of Federal Tax Lien. This federal tax lien will show up on the taxpayer's credit report which will lower a credit score and compromise one's ability to borrow money.

-- In addition to filing a lien, the IRS may also seize the taxpayers checking and savings accounts to pay the back taxes. I had about $350 in my checking account which they grabbed, thank-you-very-much.

-- If there isn't enough money in the account to cover the bills, "wage garnishment" is the next step. The IRS has the power to levy, which allows them to take part of a paycheck without any sort of court hearing nor advance warning. I didn't know my paycheck had been garnished until payday when i discovered that half of it was missing.

-- Because I live in a community property state, the IRS also came after my new husband as well. While they could not garnish his paycheck, they were positioning themselves to lien the home he bought prior to our marriage and force a sale to recover the debt.

-- And that wasn't all. Now that the IRS had a tangible asset to lien, they weren't going to stop with the $5,000. My ex husband apparently had even more back taxes which the IRS demanded I pay as well.

How the problem was resolved.

When a tax problem gets this messy, there really is only one solution and that is to hire a good tax attorney. Fortunately, my husband's family had a good one and he was able to resolve most of the problems in pretty short order.

Between he and the IRS, they determined that I was only jointly responsible for the $5,000 tax bill but not for any later tax debt that was incurred. And once we paid off this bill the attorney then sued my ex husband for the debt which was his to begin with.

In the end everything worked out, except for the lien history which stayed on my credit report for another ten years. It certainly could have been a whole lot worse, however.

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