What Happens When You Don’t File Your Taxes?
We are lured with the idea of not paying taxes since there are so many taxpayers.You go into believing that this move will be overlooked. Unfortunately, not paying your taxes matters a lot, and believe it or not, the IRS will know. It is then essential to know what the consequences for not filing your taxes are, what you need to do if you were not able to do this obligation, and where to go for help.
For the government, non-payment of taxes is considered stealing and you could be penalized for this. Levels of penalties differ depending on your tax status:
* Penalties for filing your taxes late
* Not filing for taxes at all
* Penalties for not paying your taxes
Late filing gives the least overdue fees. A mere 5% monthly interest is added to your total tax due. The IRS, on the other hand, can charge you up to a maximum of 25% as penalty. Let me illustrate this through an example. Tax returns filed on June when it is due on April 15 are charged with 15% interest.
What options do you have if you still have not filed your tax return and April 15 is already fast approaching?
You may contact the IRS if you feel you require additional time in filing for your taxes. One way of doing this is by filling out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Once the request is approved, you are allowed until August 15 to take care of your tax returns. If this period is inadequate, filling out Form 2688 gives you additional time. It is imperative that you file for an extension as doing otherwise automatically gives you the 5% interest.
It’s important to note that requesting for an extension doesn’t give you more time to pay your taxes. By April 15, you must pay for at least 90% of your dues. If you forget to do this, you will be given a penalty of 0.5% per month. This scenario then brings us to the next classification of penalty, which is not paying what you owe.
Certainly, not paying the whole amount is better than not filing at all. Again, let us demonstrate this by saying that you owe $5000. Paying only $1000 results to a mere $20 charge, which is 0.5% multiplied by $4000. Thus, it is important that you file and pay your taxes whatever way you can.
The IRS may make use of more severe measures should the agency see that you persist to be a delinquent tax payer. First, the penalty increases 1% monthly. The IRS can also compel you to mortgage your assets or get a loan. Third, they can use more rigorous collection techniques like wage garnishment and levying bank accounts.
Before situations get that bad, ask for IRS help. You will realize that they are not the Big Bad Wolf that they were portrayed to be. You may ask for additional time to pay your taxes (from 30-120 days). A favorable payment arrangement may also be set up. IRS help is available in many forms: installment plans, temporary delays, or Offer in Compromise. Visit the IRS website for additional information on these alternatives.
The most serious penalties are imposed to those who do not even bother to file for their taxes. This situation will incur you large amounts of money, aside from making it hard for you to ask for IRS help. You will be charged with 5%-25% of the total taxable amount monthly. Let’s take a person owing $5000 and is already 5 months late for filing as an example. Total penalty is 5% times 5 times $5000. This costs you another $1250, more than one-fifth of the amount you originally owe.
The IRS, however, extends its hands to those who consistently refuse to file for their taxes. One, a person may be sent an accomplished return (duly filled-out by the IRS) with the bill and applicable fees. This move, on the other hand, forfeits the taxpayer’s deductions due to him. If this effort of the IRS proves unsuccessful, then it can exact other measures like pressing for criminal and civil charges.With all these serious consequences, it is important to ask assistance from the IRS so you can explore for favorable alternatives before your tax obligations goes awry.
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