Process

• If the IRS does not receive your tax owed by the due date, it will send a Demand for Payment notice. The notice will include your tax due and the amount of penalties and interest that have been assessed to you. If the debt is not paid, the IRS can then pursue other means to collect the outstanding balance.
  
  

Penalties and Interest

• The two penalties associated with failure to pay income tax are the Failure to File, or FTF, and the Failure to Pay, or FTP. The IRS may assess a FTF penalty in the amount of 5 percent of the underpaid tax for each month the tax is late, and a FTP penalty in the amount of 1/2 percent of the tax for the period during which it remains unpaid.
  
  

Warning

• In addition to penalty and interest charges, the IRS may take out a lien or levy in order to collect the back taxes owed. A lien is a process whereby the IRS secures its interest in your property. For example, the IRS may secure a lien on your home to ensure that the debt will be paid before the property can change ownership. A levy, on the other hand, is a legal seizure of your property. The proceeds from the sale of your property will be applied to your back taxes. A lien can be placed on your property as soon as 10 days after the IRS notifies you of your tax debt.
  
  

Considerations

• The IRS has 10 years from the date of assessment of your tax liability to collect the tax owed, after which the IRS cannot enforce collection activity. The clock on the statute of limitations is suspended during the period in which the IRS Office of Appeals is reviewing a case or if innocent spouse relief is requested. There is also no statute of limitations on cases where fraud is suspected. The IRS defines fraud as a willful attempt to defraud the IRS, and will pursue taxpayers who owe tax due to fraud for an indefinite period of time.
  
  

Abatement

• It is possible that the IRS will abate your penalties if you can show that you have a reasonable cause for not paying your tax. Examples of reasonable causes for not paying your tax on time include overseas travel, military deferment, illness and incarceration. To request that your penalties be abated, complete IRS Form 843 and mail it to the IRS office responsible for servicing your area.