The IRS issued a reminder to those who make quarterly estimated tax payments. In order to avoid unexpected potential tax bills or penalties in 2023, the agency encouraged those who paid insufficient taxes last year to make a fourth-quarter payment by January 17.
Quarterly tax payments apply to two groups of taxpayers: Those who earn income not subject to normal withholding from paychecks and people who owed taxes in 2021. The latter may likely find themselves in the same situation when they file this year. These include:
- Those who have itemized in previous years but are taking the standard deduction.
- Two-wage earner households.
- Employees with income from other sources, such as dividends.
Consequences for failure to pay taxes timely
A recent court case highlights how neglecting to pay taxes can produce severe financial consequences.
After the defendant’s failure to pay taxes in 2005 and 2006, the U.S. government sought to collect the assessed tax liabilities. Defendant failed to pay taxes for 2012 and 2013, yet he remodeled the home in which he and his wife resided during this time.
After a Notice of Federal Tax Lien in 2014, the defendant deeded the property to his wife. The marriage dissolved in 2016. Subsequently, the wife entered an agreement with a trust company who conveyed the property to her and named the defendant as sole beneficiary. Ultimately, the defendant had accumulated more than $98,000 in taxes for four separate tax years.
IRS can pursue tax liens despite transfers of property
The court ruled in favor of the government. Since the couple purchased the property in 2002, they had an interest under both federal and Illinois law for all assessments except 2013. For that year, the court determined the defendant had committed fraud. Furthermore, the trust functioned as a nominee for the ex-wife in the transfer of the property, so the lien attached.
Tax liabilities do not die at the end of the calendar year. A change in circumstances, whether financial or otherwise, does not eliminate the requirement to pay taxes annually. An attorney familiar with how to handle tax litigation with the IRS can offer guidance.