What Happens If You Don't File Your Taxes? We are tempted with the thought of not paying taxes since there are so many taxpayers. You go into believing that this move will be unnoticed. On the contrary, not paying your taxes matters a lot, and believe it or not, the IRS will know. This then calls for us to be informed with the penalties for not filing taxes and the options that we can adopt for failing to fulfill our obligations.
The IRS sees not filing for your taxes as stealing money from the government, contrary to the belief that it is no big deal. There are different levels of penalties depending on your tax status:
* Filing for taxes late
* Penalties for not filing your taxes at all
* Penalties for not paying your taxes
Apart from being labeled as a delinquent tax payer, a number of serious consequences await you as a result of your actions. Let us discuss one by one the above-mentioned penalties.
Penalties for late filing are conceivably the lightest ones. A mere 5% monthly interest is added to your total tax due. The IRS, however, can charge you up to a maximum of 25% as penalty. Let us take a look at one instance. Tax returns filed in June when it is due on April 15 are charged with 15% interest.
What should you do if April 15 is fast-approaching, and you still did not file your tax return?
This is an area where you can use IRS help by filing for an extension. It is as simple as filling out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You then have up to August 15 to file. For more time, you can use form 2688. If no request is forwarded to the IRS, the 5% penalty starts accruing.
You do not buy time to pay for your taxes when you request for an extension. The IRS laws state that you pay at least 90% of the total taxable amount by April 15 or you will be charged with a 0.5% monthly penalty. With this, we are now ready to embark on the next type of penalty.
For sure, it is better not to pay the whole amount than not file at all. Let us use the example 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.
If you fail to pay your taxes after a number of months, the fee increases by 1% per month. The IRS can request that you take action to pay, such as mortgaging assets or getting a loan, if you continue to be delinquent on your taxes. They may need to resort to more serious collection methods, like wage garnishment or levying bank accounts.
If the situation gets really bad, the IRS can very much assist you. Extensions ranging from 30-120 days and assistance in laying out a payment plan may be provided Alternative forms of assistance include installment plans, temporary delays or Offer in Compromise. Go to the IRS site to know more about the mentioned forms of assistance. This all proves then that the IRS, after all, is not that inhumane.
The penalty for not even bothering to file your taxes is most severe. If you do not file, a 5% monthly fine is charged to the amount you owe. The maximum penalty for this infraction, however, is 25%. Say you owe $5000 and have been five months late in filing. Getting your total penalty means multiplying $5000 by 25%. This puts on another $1250 to your bill. More importantly, this situation does not make it easy for you to ask for assistance from the IRS.
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, though, takes away the taxpayer's deductions due to him. If this doesn't work, the IRS can then press for criminal and civil charges against the person. With all these serious consequences, it is important to ask help from the IRS so you can explore for favorable alternatives before your tax obligations goes awry.
Darrin T. Mish is a Nationally recognized Attorney whose practice focuses on representing clients across the United States with IRS Problems. He is AV rated by Martindale-Hubbel and is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. He has been honored by a listing in Martindale-Hubbel's Bar Register of Preeminent Lawyers. His passion is providing IRS help to taxpayers with both individual and payroll tax problems. He also spends a great deal of time traveling the nation providing training to attorneys, CPAs and Enrolled Agents on how to handle their toughest cases with the IRS. If you would like more information about his services please visit http://getirshelp.com.
