What happens to you if you don’t file taxes?
If you don’t file your taxes, what happens?
Tax day is fast approaching and you may be wondering what happens if you don’t file your taxes. This answer depends on several things – from whether you owe money or owe a refund, to whether you are required to deposit at all based on your income and status.
Do you need to file taxes?
The IRS offers a specific tool called the Interactive Tax Assistant to help you determine if you need to file your taxes, based on 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 is best to consult a tax professional if you are unsure whether to file or not. Generally, if your gross income for that tax year was less than the standard deduction amount, you will not need to file a return. This amount is increased if you are over 65 – for a single person, you would need to earn over $14,250 per year to deposit, and for married couples filing jointly, the amount that would require a deposit is $27,400 $ (or if you are both over 65, $27,800 per year).
What happens if you file late?
If you have determined that you need to file a tax return and you know you will file it late, you can request an extension from the IRS. There are two possible scenarios here, depending on whether you owe the IRS money at tax time or if you owe a refund.
If you owe the IRS:
It’s free to request an extension and the extension gives you extra time, until October 15and, to complete and file your return. Although this extension gives you more time to file the return, if you owe money to the IRS, it does not give you more time to pay your taxes. You will still have to make the payment, otherwise the IRS may impose penalties on you. You must request this extension before the tax due date (or your tax preparer can request it on your behalf).
If you are entitled to a refund:
If you are eligible for a refund and file for an extension, you simply have more time to complete your paperwork. You will not receive your refund until you complete your tax return and submit it to the IRS, then wait for them to complete your return and issue your refund.
What happens if you don’t file by the deadline?
If you fail to file your tax returns by the deadline or by the extension deadline, the IRS may impose penalties.
If you potentially owe the IRS money, they will likely send you a summons in the mail. This subpoena will initiate a legal collection process that will require you to meet your tax obligation. You may also be subject to an IRS investigation of your tax history beyond the last year only, if you have ever committed fraud.
Failure to File Sanctions
The IRS will then impose penalties if you do not file your tax return on time. You will receive a notice from the IRS by letter notifying you of the penalty and your failure to file. Penalties are assessed as follows:
5% 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 based on the original due date, not based on any extensions you may have received. The IRS can impose penalties for non-filing and non-payment, which can result in a 5% penalty for each month your filing is late.
If you go more than 5 months without paying, the penalty for failure to file is capped, but failure to pay a penalty continues until you pay the tax due up to a maximum of 25% of the unpaid tax (at the date the tax was due).
The IRS will also charge interest on penalties imposed on you, depending on the type of penalty.
What if you can’t file your return on time or can’t pay?
If you cannot file your return on time or cannot pay your taxes on time, you should contact the IRS and let them know you need an extension and request a payment plan.
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