What Happens When You Do Not File Your Taxes?
Because of the number of taxpayers, you may feel that what you do will never be noticed by the IRS. You convince yourself that it does not matter even if you don’t settle your taxes. You are wrong, unfortunately, as the IRS will notice. What happens when you do not file your taxes? Where can you go for assistance – can the IRS help?
You will probably think that not filing for your taxes is a small thing but the government perceives this as stealing and considers it an offense. There are many levels of penalties depending on your tax status:
* Penalties for filing your taxes late
* Penalties for not filing your taxes at all
* Penalties for not paying your taxes
In addition to being labeled as a delinquent tax payer , you have to face serious consequences as an effect of not filing or paying your taxes. Let us take a closer glimpse at the penalties mentioned above.
Penalties for late filing are conceivably the lightest ones. A mere 5% monthly interest is added to your total tax due. On the other hand,the maximum charge is 25%. Let us take a look at one instance. Filing for your tax in June when the deadline is on April 15 gives you an approximation of 15% fine.
What options do you have if you still have not filed your tax return and April 15 is already fast approaching?
You may call the IRS if you feel you need additional time in filing for your taxes. You can go about this request by filling out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. If the request is approved, you are given until August 15 to take care of your tax returns. If this period is inadequate, filling out Form 2688 gives you more time. You should file for the request for extension or else you will automatically be given with the applicable fees.
Requesting for an extension, on the other hand, is not equal to saying that you have more time to pay for the taxes that you owe. The IRS laws require that you settle at least 90% of the total taxable amount by April 15 or you will be charged with a 0.5% monthly penalty. This then leads us to the next type of penalty.
You must pay even a part of your tax dues if you cannot afford to settle everything. The consequences for not filing is bigger than that of not paying the whole amount. For example, you owe $5000. If you pay even $1000, you only have to pay a fee of 0.5% on $4000, which is only $20.
If you fail to settle your taxes after a number of months, the fee increases by 1% per month. If this happens on a regular basis, the IRS may intervene by letting you mortgage your assets or file for a loan. They may have to resort to more severe collection techniques, like wage garnishment or levying bank accounts.
Before situations get out of hand, refer to the IRS for help. They’re not the Big Bad Wolf they are often portrayed to be. You can request for an extension to pay your taxes (from 30-120 days). A favorable payment plan may also be set up. Other forms of IRS help include installment plans, temporary delays and Offer in Compromise, to mention a few. Visit the IRS site for more information on these alternatives.
The consequence for not even bothering to file your taxes is most severe. You will be charged 5% of the amount you owe, monthly. The maximum penalty for this infraction, however, is 25%. Say you owe $5000 and have been five months late in filing. Computing your total penalty means multiplying $5000 by 25%. This costs you a whopping $1250 on top of your bill. More notably, this situation does not make it easy for you to ask for help from the IRS.
When a taxpayer repeatedly refuses to file, the IRS can accomplish a return for him and mail the bill, plus fees. The IRS-completed return will not give the taxpayer deductions he would otherwise be entitled to. The IRS may press for criminal or civil charges should the above option prove to be futile. To refrain from arriving at these unfavorable situations, ask for the assistance of the IRS. For sure, you can arrive at alternatives that will not effect to serious consequences.
Filed under Blog by on Oct 16th, 2009. 
