If you’re facing tax debt, you’re not alone. The IRS estimated that Americans owed over $668 billion in back taxes, penalties, and interest in 2021. But ignoring the problem won’t make it go away—it could actually make it worse. Here’s what you need to know about what happens if you don’t pay your taxes.

What Happens If You Don’t File Your Taxes?

Not filing your tax return can lead to hefty penalties. The IRS imposes a penalty of 5% per month, up to 25% of the tax due. This penalty is based on the amount you owe. Failing to file only exacerbates your financial situation.

What Happens If You File But Don’t Pay?

Even if you file your tax return, failing to pay what you owe can result in interest charges and penalties. The failure-to-pay penalty is 0.5% of the unpaid taxes per month, up to 25% of the unpaid tax. Additionally, there’s a penalty for failure to pay proper estimated tax, which varies based on the underpayment amount.

You Could Get a Lien on Your Property

If your tax debt reaches $10,000 or more, the IRS could put a lien on your property. This legal claim against your assets, including real estate and financial assets, secures the payment of your tax debt. While this doesn’t mean the IRS will seize your home immediately, it can complicate matters if you want to sell or refinance your property.

Your Financial Life May Get More Uncomfortable

Continued failure to pay taxes could lead to more aggressive collection actions from the IRS. This could include bank levies, wage garnishment, and even property seizure. While it’s rare to go to jail for tax evasion due to inability to pay, it’s not unheard of in extreme cases.

What If You Can’t Pay Your Taxes?

Even if you can’t afford to pay your taxes, it’s essential to file a tax return. This helps you avoid the failure-to-file penalty and demonstrates to the IRS that you’re making an effort to address your tax debt.