If you owe taxes, the tax agency will send you a bill demanding payment. Failure to pay the bill usually results in penalties and interest. If you don't pay the bill or make arrangements to pay the bill, the agency might take action such as filing a tax lien or levy against you. If you're not sure if you owe taxes, promptly find out to avoid legal action.
Federal Tax Debt
To confirm whether you owe federal taxes such as federal income tax and Medicare and Social Security taxes, call the IRS' toll-free number. Based on the personal information you provide, such as your filing status and Social Security Number, the agency can tell you whether you have an outstanding federal tax debt. Another way to find out is to request a free record of your account by completing and submitting a Request for Transcript of Tax Return form, or Form 4506-T, to the IRS. The document shows your federal taxes owed and payments and adjustments made on your account during the last three tax years. The IRS typically has 10 years after assessing a federal tax liability to collect the amount due. Therefore, if your debt is more than 10 years old, it's likely no longer collectible. In civil tax fraud cases, no statute of limitations applies -- the IRS can sue you at any time. The agency typically has a six-year window when filing criminal charges.
State and Local Tax Debts
Contact the state revenue agency to see if you have an outstanding state tax debt, such as for personal income tax, corporate income tax, sales tax or property tax. Taxation rules vary by state. For example, if you live in a state that does not require that employees pay state income tax, you would not have an outstanding debt for that tax. You might also be able to request a tax transcript from the state revenue agency that shows your tax liabilities for a limited number of years. The amount of time the state has to collect a tax debt varies by state. For example, the California Tax Franchise Board has 20 years. Some local governments impose local taxes, such as city income tax and school district tax, on businesses or individuals in certain jurisdictions. If you don't know how to contact your local tax department, the state revenue agency can tell you.
A tax lien is a legal claim the government places against your property, such as real estate and financial assets. Unlike a levy, which gives the government the right to take your property, a lien is used as collateral for the debt. To report a lien, the taxation agency files a public document. Therefore, to find out if you have a federal or state tax lien, you can run a credit report on yourself. You can also contact the IRS, state revenue agency or the clerk of courts office in your county of residence.
Other Methods of Discovery
To ensure you receive tax notices in the mail, keep your address current with the post office. Contact your tax preparer or accountant to see if they still have your returns on file, if applicable. They might be able to give you copies and help you determine whether you owe federal, state and local taxes. If you discover that you have an outstanding tax debt, contact the taxation agency immediately to pay the debt or make payment arrangements.
- Internal Revenue Service: Collecting Process
- Internal Revenue Service: Form 4506-T
- California Franchise Tax Board: Statute of Limitations on Collection Actions
- Virginia Department of Taxation: How Do I...?
- Internal Revenue Service: Understanding a Federal Tax Lien
- Duncan Law Online: How Do I Know If I Have a Tax Lien?
- Optima Tax Relief: Tax Evasion, Fraud and the Statute of Limitations
- American Institute of CPAs: Taxes–States–Departments of Revenue Links