Although most would prefer to just forget about it, tax filing season is unavoidable when it comes around at the beginning of each year. The IRS requires all U.S. citizens to file a tax return if their income is above a certain threshold. The repercussions for failing to file a tax return can be severe, often taking a toll on the personal lives of those that do so. If you have yet to file your tax return(s) or are thinking about not filing this upcoming tax season, make sure to review a few repercussions listed below that you could face.

You fail to file your tax return

Should you choose to not file your tax return with the IRS, don’t expect to get off scot-free (and yes, the IRS will notice if you don’t file). One of the first things that may happen is that the IRS will file a substitute return on your behalf and will tack on penalties for your failure to file. This is not for the benefit of the taxpayer, as the IRS will not include any write-offs or deductions – meaning you could find yourself owing to the IRS more than you actually should owe. If your unfiled return should have resulted in a refund, that refund may be lost if you do not file within 3 years of the deadline, inclusive of any valid extension. The failure to file penalty could increase your tax bill by up to 22.5% plus interest!

You don’t pay the tax liability that is owed

If a taxpayer fails to file their tax return and does not pay back the owed tax liability, the IRS will not only charge you a failure-to-file penalty but also charge you 0.5% of your unpaid for taxes for every month you don’t file your tax return. It is important to note that an extension to file is not an extension to pay, the penalty will begin to accrue the day after the tax deadline without consideration of any valid extensions to file. If a taxpayer chooses to not pay their balance or continues to accrue additional future tax balances, the IRS could potentially take action by placing liens on their property, property seizures or even levying their bank account. The IRS will continue to take collection action against the taxpayer until the owed balance has been paid back in full.

If you can’t afford to pay back the owed tax balance

The IRS does offer options to those who don’t have the ability to pay their balance back in full but still want to remain compliant with the IRS. There are several resolution options that a taxpayer can go on if they need time to pay back their balance. For those who have the ability to pay the IRS, the IRS offers a monthly payment plan option based on a taxpayer’s affordability. If a taxpayer cannot afford to be placed on a payment plan, the IRS does have hardship options. The IRS will review a taxpayer’s current financial status and if the taxpayer qualifies, they will be placed on a hardship where they would pay very little to nothing back to the IRS. It is important to keep in mind that hardship agreements are temporary, and the IRS will reevaluate anyone that is on a hardship every one or two years to see if they still qualify.

Even though tax season is not a very popular time of the year, it is necessary to continue to file your tax return in order to stay compliant and out of collections with the IRS. Failing to file your tax return will result in penalties against you and increase your total tax liability. Always remember that if you don’t file your tax return(s), it can result in the IRS either filing on your behalf or taking collection action against you if you do owe a balance. If you can’t pay the balance back in full, you can always request that the IRS place you on a payment plan in order to avoid the IRS coming after you. If you need further assistance, you can always contact a tax firm to help assist you.

 

The content contained on this page is strictly for informational purposes and may not apply to your specific situation. We recommend you consult with a tax professional to evaluate your unique situation. Forward Tax does not provide tax, bankruptcy, accounting or legal advice.

Posted in Taxes