The average American citizen can find tax laws to be very intimidating.  Because there are a multitude of tax laws, studying all of them could take years.  In fact, the study of federal tax laws would take even longer than that since very few of our tax laws are static; many are amended with each new tax year. 

Most Americans leave it up to their accountants to be well versed on federal tax laws.  Since tax laws can be complicated, this is probably the best method for most of us to use.  However, it is important that we take responsibility for learning the facts about the laws that most commonly affect us. 

One of the most important things to understand concerning tax law is that the responsibility regarding the payment of outstanding taxes falls squarely on the taxpayer’s shoulders.  Some people mistakenly believe that hiring a tax accountant ensures their taxes will be filed correctly.  However, even the most astute accountants can be prone to error.  If an accountant makes a mistake when computing a person’s taxes, the taxpayer is still responsible for any additional taxes due.  This may include paying any late fees or penalties incurred as a result of the error.

In the event that a taxpayer is unable to file or pay his/her taxes by the April 15th deadline, they may request an extension from the Internal Revenue Service (IRS).  The normal extension granted is for periods between 30 and 120 days.  If the tax debt is paid within this short time period, the balance may only accrue a small penalty and interest fee.  However, if this tax debt still remains unpaid, there are tax laws in place that can offer relief.  It is important to note that these options carry more of a penalty and a higher tax interest rate than the short extension explained above.   

Briefly, the most common methods of tax relief assistance are deferment, partial payment installments, and traditional monthly installments.  All of these programs charge the taxpayer interest and penalties based on the outstanding principle balance until the tax debt is paid off.  However, since deferment takes place over a longer period of time, the interest charged may be a lot more than with the installment plans.  The fourth option, bankruptcy, should be considered only as a last choice for Americans to pay off their tax debt.  This is mostly due to the devastating effect bankruptcy can have on a person’s credit rating. 

While none of the above options are desirable, nonpayment of taxes can have even worse penalties.  Tax law allows the government to take control of a person’s assets if they are in tax debt.  The property is used as collateral until the debt owed to the government is repaid.  The IRS can only seize enough property to cover what is owed.  However, when a lien is filed, the IRS notifies any other creditors the taxpayer has, which can negatively affect a person’s credit rating.  The drawbacks do not end there.  An IRS lien can continue to be seen on a person’s credit report even after the tax debt is completely repaid, making harder to receive credit in the future.  In addition, the taxpayer will have to pay any jurisdiction charges the government incurred while filing the lien.

Federal tax law also allows the government to use a levy as a way to secure repayment from those who are in debt.  A levy is different from a lien in that the property the government collects will satisfy the tax debt.  With a lien, tax law says that once the tax debt is paid, the property must be returned to the taxpayer.  However, if the tax debt is not repaid, the government has the right to auction off the taxpayer’s former belongings.  Common items that a government might place a levy against include homes, cars, and boats.  The government can also request a levy against a person’s wages or state tax refunds.

Taxes are one of the things American citizens cannot avoid.  Therefore, understanding tax law (as much as possible) is an important part of life in this country.  Knowing tax law can help a person avoid common mistakes, understand their rights if errors occur, and be aware of the options available in case a tax bill cannot be paid on time.  No one likes to think about paying taxes if they don’t have to, but studying a little now, can instill confidence in the knowledge of tax law in the future.