If you’re thinking that not paying your state or federal back taxes won’t come back to haunt you later, you’re wrong.
The pain comes in multiple forms: financial, legal, and, now, reputational.
That’s right: Officials from state tax departments across the country are taking measures to publicize and, in turn, embarrass tax debtors that ignore their back tax debt owed to states.
While the IRS may turn to harsher remedies for collecting back tax debt – like wage garnishments, tax liens, or tax levies – state officials are taking a page out of the public relations playbook and listing their top tax delinquents for everyone to see.
By the end of 2014, Vermont will start publishing the list of the state’s top 100 tax debtors in both individual and business taxpayer categories. Names and addresses won’t be free from inquisitive eyes that want to see who’s behind on paying their tax bills.
To collect on a total tax liability of more than $480 million, California lists its top tax delinquents online and updates its list every three months. Like Vermont, California gives notice to delinquents before they get listed, but if measures aren’t made to pay, the names and addresses go online.
Massachusetts puts out a list of tax delinquents with more than $25,000 in back tax debt. Washington also has a list and divides its listing between those that hail from the eastern or western ends of the state. Pennsylvania publishes an online list of those with tax liens filed against them.
While state tax officials will do more and more to make sure people and businesses pay their back tax debt, the stigma of being caught in tax trouble should alone be enough to make people get compliant.
It can also be bad for business, too.
If potential business partners notice your current or past business owes back tax debt, they’ll be less likely to want to partner up with you on a new business venture.
If potential investors notice your delinquent tax status, they’ll think twice before cutting you a check to get that new business of yours up and running. Indeed, investors would likely pass up on investing with you as they’d likely think you’d use investment funds to pay down back tax debt.
And being on a list of delinquent tax debtors gives the general public the impression that you or your business are in bad financial waters. Having back tax debt gives people the impression that bad financial stewardship is a part of daily life. And for a business, the impression that whoever’s running it is a bad manager.
But with some proper planning and some financial fix-it work by a tax professional, back tax debt can be wiped out or paid down sooner than you know.
Then, you can get off the government’s bad tax list and start a list of things to buy with all the money saved.
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