Consequences of Not Filing Your Taxes
There is a common belief among Americans who are behind in their taxes. They figure that maybe if they do not pay their taxes, no one will notice since we live in a world full of tax payers. The IRS definitely notices when anyone goes late or unpaid on those taxes. There are penalties assessed and this will also affect your credit. Learn what options you have if you decide that paying your taxes just doesn't fit into your budget this year!
If you decide to not pay your taxes the IRS considers this a form of stealing from the government. This is a big deal and people who see it otherwise have been misinformed. There are several penalties and they are assigned based upon your tax status. You can get a penalty for not paying your taxes, not filing your taxes and even if you file late.
The easiest penalty to deal with is when you are paying the taxes late. You will be charged a monthly penalty of 5%. So with every month it will be an extra 5% but the maximum penalty is 25% a month. So what to do if tax day is approaching and you haven’t filed yet?
You can file for an extension which allows you until August 15th to file. Form 4868 is an Application for Additional Extension of Time to File U.S. Individual Income Tax Return. If you need any additional time then form 2688 Application for Additional Extension of Time to File U.S. Individual Income Tax Return will allow you to file for a second extension by October 15th.
You need to have a good reason; maybe you are having trouble finding a good tax preparer because something happened with your previous one. If you fail to file a request, then after April 15th the first 5% penalty will be assessed. When requesting an extension this is not the same as saying that you now have additional time to pay your taxes. The law states that you need to settle at least 90% of your taxable income and failure to do so with result in a 0.5% penalty monthly.
Keep in mind that you have to pay a part of your taxes even if you cannot afford the whole amount. The consequence for not filing will always be higher than paying off a portion of those taxes. You must pay even a part of your tax dues if you cannot afford to settle everything.
If you are going to apply for an installment plan you will have to attach Form 9465 Installment Agreement Request, on the front of your tax return. If you do not owe more than $25,000 in taxes the IRS has made it possible for you to pay off those taxes within five years. Make sure you have your proposed payment plan and how much you would like to pay each month on this request.
There is a $43 fee when you set up this agreement, in addition to the interest and late payment penalty that is assessed. The penalty is usually 0.5% of your balance due each month and when the IRS approves the installment, the percentage rate will drop to .25%. This is if you filed your taxes on time and didn't get a levy notice.
If you are out of ways to come up with the money to pay off your taxes, even through an installment plan, you can compromise to settle your debt. This is when you settle the debt for less than the full amount. Send in Form 656 Offer in Compromise and Form 433-A Collection Information Statement, to the IRS. After you pay the $150 fee they will determine your eligibility.
Don't let the situation get too far out of control. You can ask the IRS for help, contrary to belief they are not the bad guys. They can be patient with delinquent taxpayers. You might be sent a finished return, filled out by the IRS with a bill and applicable fees. This would forfeit any deductions due by the taxpayer. Or, the IRS can file criminal and civil charges. This would be something you would never like to have happen, so please contact the IRS and see what they can do for you.
There are many consequences but ultimately the best thing to do would be to pay off your tax debt. Figure out what is the best possible solution for you and make it happen. The IRS will be happy you did!
