What Happens if You Don't File Taxes?
Tax time is always a stressful time of the year. Many taxpayers would rather not be bothered with all the paperwork and calculations involved in the process. However, there are some consequences of ignoring taxes and failing to file them.
We're going to answer the question, "What happens if you don't file taxes?" and then explain a few things you can do to ensure that you do file your taxes each year on time. Our goal is to help you understand your taxes and to be a better taxpayer in future years.
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Choosing not to file your income taxes is most likely the worst decision you can make. You have other choices that you should make before you avoid filing taxes altogether. These are some of the adverse things that can happen to you if you do not file your taxes:
1. Interest and Penalties Will Accrue
You will start accruing interest the day after you skip out on filing your taxes.
Failure to file penalty
You will also start getting penalties such as the failure to file penalty. The failure to file penalty is about 5 percent of the taxes you owe each month thet go unpaid. As mentioned before, the IRS starts issuing this penalty the day after the tax deadline. The only good part about this situation is that the IRS caps this penalty at 25 percent. This particular penalty will stop accruing after you reach the 25 percent threshold.
Late payment penalty
The IRS will also issue a late payment penalty when you finally get your taxes filed. The reason for the late payment penalty is that you failed to pay your taxes on time when you failed to file. This will not apply if the IRS owes you a refund. However, the chances are high that you're the one who owes the IRS if you chose not to file. That's usually the case unless the failure to file is an honest case of forgetfulness. The penalty for late tax payment is the same as the failure to file penalty. You'll have to pay 5 percent of the amount owed each month it's late.
Underpayment penalty
Another type of penalty that you might have to deal with after your taxes get done is an underpayment penalty. You might have to pay this penalty if you failed to pay enough taxes throughout the year. This is especially true if you're a self-employed individual.
2. They May File a Substitute Return
The IRS may choose to file a substitute return for you at some point. The problem with this is that they will not factor in any of the exemptions or expenses you might have recorded if you had filed your tax return. The result will most likely be an inaccurate tax liability.
You might end up owing the IRS much more than you would have owed if you'd done something to get your taxes filed in the right amount of time. That's why it's imperative that you do everything you can to ensure that you file your taxes on time.
3. The IRS Will Start the Collections Process
If the IRS files a substitute return for you, they will calculate the amount of taxes you owe them. They'll then send you a letter to let you know the figure they calculated. They will expect you to pay those taxes in addition to any extra interest and penalties they've assessed to your return. What you do from that point will determine what happens next.
Don't ignore the irs
The best tip we can give you if your situation reaches this point is to stay in touch with the IRS. Do not ignore their notices. Contact them at the phone number they provide you and make arrangements to pay the taxes you owe. The IRS is usually very accepting of installment arrangements, but you can't hesitate to contact them.
Set Auto-Pay
They will let you know how much they are willing to accept as payment for the monthly installment. You can provide them with a debit card number to perform an auto-pay for you if you like. Auto-pay will be easier for you because the money will come right off your card. You won't have to set reminders and risk the chance of defaulting on the installment agreement.
4. You Could Be Levied
The IRS will take drastic measures to retrieve their funds if you fail to file your taxes and fail to pay your penalties and taxes. You'll most likely receive numerous notices, as they'll want to give you a chance to resolve the situation. However, they will take extreme collection measures if you don't communicate with them or make any effort to resolve the problem.
Your precious assets will be threatened once the IRS issues a levy for the tax money. They could place a levy on your home, car, or any other property you one. They may also garnish your wages to the fullest.
5. You Face Possible Jail Time
The worst possible scenario with the IRS is that they can place criminal charges on you. They can bring forth a legal matter if they feel that you are intentionally avoiding filing your taxes. They can also do so if you fail to provide them with an honest return.
Tax Evasion
This crime is called tax evasion. Many celebrities have gotten into trouble with IRS for tax evasion. However, that doesn't mean that everyday debtors are exempt from such charges. The IRS could very well charge you with a crime over failing to file your taxes.
Therefore, the answer to "What happens if you don't file taxes?" is complex. A lot can happen, and you probably don't want to experience any of it.
What to Do If You Don't File Your Taxes?
We understand that sometimes life happens, and people forget to file their taxes. Your failure to file your income taxes may not be intentional. An illness, family emergency, or another huge life event can cause you to get a little backed up with tax filing.
However, you should take some steps as soon as you realize that you have not filed your taxes. You don't want to know what happens if you don't file taxes. Therefore, you should do this immediately:
File for an extension
A tax extension can be your lifeline, but it might not help you if you've waited too long to file your income taxes. You will usually have until April 15 to file your taxes. If you don't file your taxes, you still have the option to request an extension. The catch is that you have to request the extension by April 15. Therefore, an extension will not help you if you've passed that deadline.
If you haven't passed the deadline, all you'll need to do is file a form 4868. It's a short form that only has two small sections to it. The first section is where you put your identifying information. The second section is where you will estimate your tax liability. You can download and complete the form and send it to the IRS for the extension. Alternatively, you can file the form online. Filing it online will be faster for you. You might miss the deadline if you mail it.
Once the IRS approves your extension, you will have six months to do your taxes. Your deadline will be October 15 instead of April 15. It would be in your best interest to get those taxes filed as quickly as possible so that you don't miss the new deadline. Do this to avoid learning the answer to the question, "What happens if you don't file taxes?"
One thing you need to understand about extensions is that they only extend the time you have to file your actual tax return. Extensions do not give you additional time to pay your taxes. That's something that you would need to work out with the IRS. Contact them directly about an installment agreement if you have taxes to pay.
Contact irs about notices
We probably can't stress enough how important it is to keep in touch with the Internal Revenue Service. Make this organization your best friend if you receive any notices from them. The IRS is currently backed up with additional processes they need to go through and new software they need to debug.
Therefore, it would be easy for you to get lost in the system. Don't let that happen to you. Stay diligent in maintaining contact with the organization to ensure that you don't have to explain what happens if you don't file taxes.
Make your payments on time
Make sure that you pay all installment payments as agreed. The IRS will most likely be willing to give you a chance if you end up owing them money. However, you do not want to mess that up by defaulting on the arrangement.
Do whatever you need to do to ensure that your promised money will be in their hands every month. If you have to provide them with auto-pay information to avoid missing a payment, do it. Just make sure that the money for the payment is in your bank account when it's supposed to be.
Tips for Making Sure You File Your Taxes on Time
To avoid learning what happens if you don't file taxes, you'll need to take some measures to ensure that you file your taxes. These are some tips that will help you to file your taxes on time every year. Life can get busy and distracting at times. Tax season is going to be in your life every year you're alive. Therefore, you have to make getting your taxes done a priority. These are the best tips we can give you so that you can stay abreast of the taxes you'll need to pay:
Mark Your Calendar
You can stay on top of your taxes by marking your calendar. It's okay if you still use an old-fashioned paper calendar. Just make sure that your calendar sits somewhere you can see it every day. The refrigerator is a great place for it. We suggest marking the date that you need to start filing in bold red letters or markings. Alternatively, you can use a smartphone app to remind you when you need to file your taxes. You can set a relentless daily reminder if you're prone to forgetting important dates. Let the annoying alarm bug you until you file your tax online. That will ensure that you aren't someone who deals with the consequences of what happens if you don't file taxes.
Start Preparing Early
Start preparing to file your taxes early. Of course, you won't be able to finish the process until you receive all your W-2's and other forms. However, you can still prepare by filling out your personal information, choosing your appropriate tax status, and so on. It's a good practice to get into.
Hire a Tax Preparer
You may want to hire a tax preparer to do your taxes for you. It's a great choice if you're someone who gets overwhelmed with work and family life. You might not feel as though you have the time to file your taxes. That's why the world has professional tax preparers. They're in business to file taxes for people who can't do it themselves. You'll most likely increase your refund or minimize your tax obligations if you use a third-party provider. Yes, you'll have to pay a fee. However, that's much better than suffering from what happens if you don't file taxes.
Use Tax Software
You can also use tax software to file your taxes. That way, you can avoid the absolute mess of dealing with paperwork and sloppy calculations. The software will calculate your refund or tax obligation for you. Tax software will take you through the process of filing your taxes slowly and step-by-step. You'll also be able to see the progress of your return as you're working on it. You might be able to use the software for free if you have a simple return.
Request an Extension if Necessary
Make sure you request an extension if you believe that you will need more time to file your taxes. It's better to request an extension than to deal with the repercussions of what happens if you don't file taxes. As we said, the form is concise, and you can file it quickly online. Do this to protect yourself from what happens if you don't file taxes.
Check to Ensure the IRS Received Your Return
Finally, you need to ensure that the IRS has received and accepted your tax return. This step will be easy for you if you use an online tax preparation service. The service provider will most likely email you when the IRS gets your return. Otherwise, you'll need to contact the IRS directly by telephone. Another option is to keep checking the "Where's My Refund?" site if you have a refund coming. Don't forget to check with them and confirm that they've received the information. That's a good way to avoid finding out what happens if you don't file taxes.
Contact Us if You Need To
This piece should help you take charge of your taxes from herein. Feel free to contact us if you have any additional questions regarding this matter.
We are here to help you. We built our company to assist debtors from all walks of life. We are a personal finance company that mainly connects people to the education and services they need to strengthen their credit profiles.
You'll find a wealth of information and contacts through us. Some of the items that we can help you get are loans, advisors, learning tools, and other people who have the same goals. We are not a lender, but we have many lenders in our network. We can connect you to a wide variety of lenders who offer amazing loans, and other financial products.
Get Help From Goalry
The Goalry Mall is the new app that we put together to give visitors easier access to the products and services they need. The app is built like a mall to give you the feeling that you're "shopping" for your financial goals. It's set up with three floors: the social floor, the education floor, and the "stores."
Interactive Financial Goal Mall
The stores are compartmentalized areas where you will find all the information you need for a specific goal. For example, you'll visit the Taxry store if you need to find information to remove some of the hassle from your taxes. You can connect with tax professionals, learn about various tax topics, and utilize some tax tools.
Signing up for the Goalry Mall costs nothing. All you need to do is visit the mall and sign up for a member ID. Once you have that, you'll get access to all the floors, and you can start shopping for the tools you need to meet your financial goals. That's all there is to it. Head over to the Goalry Mall and check it out to see what it can offer you.