Those who owe the Internal Revenue Service (IRS) a large sum of money may believe that they are in the clear if they do not hear from the agency about that bill for a couple of years. If they haven’t reached out, they must have lost track of the bill, right?
Unfortunately, this false conclusion can lead to a big surprise during a major life event.
Let’s say you were able to gather enough funds to buy a house. Let’s say you were even able to use cash to buy that house. Why would this transaction ever show up on the IRS’ radar? You should be good, right? When large amounts of money change hands taxes almost always come into play in one form or another. Real estate experts note that the seller of the property will likely fill out Form 1099-S, Proceeds from Real Estate Transactions Form with the IRS. Even if you are not revealed in this form, the buyer will likely catch the IRS’ attention through the payment of property taxes.
It is also important to note that the title company may report the transaction to the Financial Crimes Enforcement Network (FinCen). The Bank Secrecy Act often requires banks complete a currency transaction report (CTR) whenever there is a transaction that exceeds $10,000. The government uses this form to help find financial crimes like tax evasion.
These are just a few of the ways the IRS could take notice with a cash transaction. Those who use a mortgage would likely catch the IRS’ attention early on, as the bank would likely do research and find the tax bill before it even grants the loan. Other events that can catch the attention of the taxing authorities include cryptocurrency transactions as well as simply having a high net worth or owning a business.
The fact is, the IRS will expect payment from those who owe $200,000 or more in tax debt — even if the agency has not made contact in years. Major life events, like buying a home or bringing money stateside that was once overseas, can catch their attention and they will renew their efforts.
What are my options?
Those with a large tax bill have options. One example is the use of an installment agreement. This is essentially a payment plan with the IRS. An experienced attorney can review your situation and discuss this and other options to help you get out in front of this tax debt before it becomes a bigger problem.