Every year, millions of taxpayers don’t file their Federal income tax return on time even though its rarely a good idea. Why does that happen and what are the consequences of not filing a tax return?
Why don’t Taxpayers file timely?
There are a number of reasons that taxpayers don’t file their tax returns timely, but the two reasons below are what I see most often in tax practice:
- Most individuals don’t file their tax returns timely because they owe, or believe they owe, income tax. They’re hoping the problem will magically go away.
- They do not have the information to file their tax return properly. Sometimes, these are taxpayers who work W-2 jobs, but more often, it tends to be taxpayers who are self-employed, who have more complicated tax returns.
The goods news is that there are solutions to these problems.
- If a taxpayer owes the government, there are resolution solutions to tax debt including Payment Plans, Offers-In-Compromise, and currently uncollectible status available to the taxpayer. A taxpayer shouldn’t fail to file their tax return simply due to owing income tax.
- For lack of information issues, taxpayers can seek professional tax help if needed to help them rebuild their return. Remember, even if your return is not perfect, you are required by law to file your tax return.
What are the Consequences of Filing Late?
There are a number. Here are 7 Negative consequences of filing late:
- If you owe taxes, you will now incur a late filing penalty. This penalty is harsh. It is 5% per month with a 25% maximum penalty.
- If you owe taxes, you will also continue to incur a penalty for the late payment of taxes. This penalty is ½ percent per month with a 25% maximum penalty.
- In addition to penalties for late filing and late payments, interest is accruing on both the tax itself and the penalties.
- If your problem goes on long enough, the IRS will file a Substitute for Return on your behalf. Hint! It won’t be to your benefit and you won’t like their filing.
- Eventually, not dealing with this debt may mean levies and liens in addition to the penalties. Worst case scenario, it could become criminal.
- The IRS has 10 years to collect tax debt. Guess what? That clock doesn’t start until the return or SFR is filed.
- If you’re owed a refund, remember that you have only 3 years to request the refund. Otherwise, it belongs to the government.
Do you Need Help?
If you need help getting caught up or any issue related to IRS tax debt, we can help you. Please give me a call at (972) 821-1991 or at [email protected]. To learn more about us, visit our website at https://jablonskyandassociates.com/.
