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Tax Debt and Your Job

June 16, 2016

Tax Debt and Your Job

Discovering that you owe tax debt can be a truly stressful (and embarrassing) experience. Your IRS problems may even spread beyond the relative comfort of your home, potentially impacting your job or employment prospects.

Before dismissing a delinquent tax balance as “something to handle later,” first consider what consequences can befall your professional life. Also, understand that resolving your tax debt is within your power, and is certainly in your best interest. Your work reputation might just depend on it.

Tax Debt Escalation

It’s helpful to first examine how a tax debt becomes a problem larger than simply a bill to pay. The IRS will typically afford you a certain period of time to either pay your tax debt in full, or negotiate a formal resolution. However, if you take no action after receiving delinquent notices, you open yourself up to the full scope of the IRS’ collection apparatus.

Your Wages

When you don’t willingly attempt to resolve your tax debt, the IRS can take aggressive steps to take what is due. One collection method that you may be subject to is a wage garnishment. This involves a percentage of your earnings being withheld in order to satisfy your tax debt. Your employer will not learn the specifics of your delinquent tax bill, but a wage garnishment will provide an unfortunate illustration of your circumstances.

If you are a contract worker, the full amount of your earnings can be taken rather than just a percentage. Regardless of whether you are a contractor or traditional employee, your employer will be expected to comply with the IRS’ garnishment instructions. In other words, you won’t be able to negotiate with the boss, no matter how friendly you are.

Job Stability

Whether you are rooted in your current position or you’re pursuing a new job opportunity, there is another IRS collection tactic to keep in mind: the lien. The IRS can place a lien against you when you have a delinquent balance, which effectively tells other creditors that they are first on line to collect from you. This action will negatively impact your credit, impairing your ability to secure a mortgage, loan or even rent.

But your work life may also be in trouble when a lien is present. Many employers will require you to maintain healthy credit as a condition of employment. This is particularly true if your position requires security clearance or necessitates the use of a professional license. Finally, prospective employers are more frequently examining candidates’ credit scores as a part of the hiring process; a tax lien can jeopardize what might otherwise be a tangible opportunity.


No matter what type of collection action you’re facing or are already experiencing, you always have the option to reach a formal resolution with the IRS. This will likely involve reaching an agreement over how you will pay your tax debt over an extended time, although a variety of options may be available to you. You may wish to consult with a licensed tax professional to explore the full range of tax solutions.

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