We are human and as such, at some time “may” have been tempted to ignore filing taxes or to simply postpone the routine to the point that you owe the government years’ worth of tax returns. What would happen if I didn’t file my taxes this year? Is the government really going to come after me?
Experience has proven, you would benefit more filing your return in magic marker rather than simply ignoring when due — no matter how frightening the chore might be.
“Every once in a while, tax preparers will have a client that have valid life-threatening problems or something [that prevents them from filing their taxes]. There are innumerable situations in which a taxpayer might fail/pay their taxes.
Outlined below are a few common instances of what you can expect if you fell short this past tax filing season:
…It’s October 16 and you still haven’t filed your taxes, or your electronic filing was rejected:
If you don’t file your return to the government by the April and October deadlines, you’ll get hit with a failure-to-file penalty, which starts at 5% of however much you owe, maxing out at 25% of your tax bill. If you wait more than 60 days to file, you’re charged a $135 fee or 100% of the taxes you owe (whichever is less). On top of that, you’ll be charged a painful 3% daily compounding interest on the unpaid balance .There’s an exception here: If you’re owed a refund, you won’t be charged a late-filing fee at all. But you won’t get that refund unless you file a return, and you’ve only got three years to claim it before your refund winds up somewhere other than your hands.
What to do: If there are extenuating factors that make it impossible for you to file on time, you can apply for an additional extension with the government. That can buy you additional “some additional time to file” but not to pay anything owed and must be done by the last day for extension filers tax deadline date.
You’ll may still face some consequences, but the government appreciates taxpayers who at least “communicate” and file their return(s), even if they can’t pay their whole bill. On-time filers pay a discounted late-payment fee of 0.25% per month so long as they have a payment agreement in place. But really, it’s the compounding 3% interest charges on unpaid tax bills that can do the most damage.
If you owe less than $50,000, you’re qualified to set up a payment plan with the government and should do as soon as possible. You might consider enlisting the help of a Tax Firm or Tax attorney for assist, especially if you’re more than a year behind.
There are situations when taxpayers simply can’t file their taxes and/ pay their bills and don’t qualify for payment assistance. In that case, the IRS will eventually levy a federal tax lien against you. In a worst-case scenario, the IRS can garnish your wages, bank accounts, Social Security benefits and even your retirement income to recoup unpaid taxes.