What happens if you don’t file your taxes?
Life happens, and sometimes you may experience an event in your life that interferes with your ability to file your taxes on time. What happens if you don’t file taxes? That answer depends on several things – from if you owe money or if you’re due a refund, to if you are required to file at all based upon your income and status.
Do I need to file my taxes?
The IRS offers a specific tool called the Interactive Tax Assistant to help you determine if you need to file your taxes at all, based upon your income and status. To use this tool, you need your basic information, the amount of federal taxes (if any) withheld from your paychecks, and your filing status.
It’s best to consult a tax professional such as the team at Diversified Tax if you’re not sure if you need to file or not. In general, if your gross income for that tax year was less than the standard deduction amount then you will not need to file a return. This amount is increased if you’re over the age of 65 – for a single person you’d need to make over $14,250 per year in order to file, and for married couples filing jointly the amount that would require a filing is $27,400 (or if you’re both over 65, $27,800 per year).
What if I file my taxes late?
If you’ve determined that you do need to file a tax return, and you know you’ll be filing late, you can apply for an extension with the IRS. There are two possible scenarios here, depending on if you owe the IRS money at tax time, or if you’re due a refund.
If you owe the IRS:
It’s free to request an extension and the extension provides you with additional time, until October 15th, to complete and file your return. While this extension gives you more time to complete the return, if you owe the IRS money, it does not give you additional time in paying your taxes. You’ll still need to make the payment amount or you may be assessed penalties by the IRS. You must request this extension before the tax due date (or your tax preparer can request it on your behalf).
If you’re due a refund:
If you’re due a refund and you file an extension, you simply have more time to complete your paperwork. You won’t receive your refund until you complete your tax return and send it back to the IRS, and then you’ll wait for them to complete your return and issue your refund.
What happens if I don’t file my taxes by the deadline?
If you neglect to file your tax returns by the deadline, or by your extension deadline, then the IRS may impose penalties.
If you potentially owe money to the IRS, they’ll likely send you a summons in the mail. This summons will initiate a legal collections process that will compel you to meet your tax liability. You may also be subject to the IRS investigating your tax history beyond just the last year.
Failure to File Penalties
The IRS will then impose penalties for your failure to file your tax return within the specified timeframe. You’ll receive a notice from the IRS via letter informing you of the penalty and your failure to file. Penalties are assessed as such:
- 5% of unpaid taxes for each month, or partial month, that your return is late – the penalty will not exceed 25% of your unpaid taxes due
Penalties on unpaid taxes are assessed per the original due date, not based on any extensions that you may have received. The IRS may impose penalties for both failure to file and failure to pay, which can result in a 5% penalty for each month that your return is late.
If you go longer than 5 months without paying, the failure to file penalty maxes out but the failure to pay a penalty continues until you pay the tax due up to a maximum of 25% of the unpaid tax (as of the date the tax was due).
The IRS will also charge interest on the penalties that are assessed to you, depending on the type of penalty.
What if I can’t file my taxes on time, or can’t pay them?
If you can’t file on time, or can’t pay your taxes on time, you need to contact the IRS and let them know you need an extension and apply for a payment plan.
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