What Happens When You Don’t File Your Tax Returns?
Have not submitted your tax returns and are wondering what the IRS can and will do to you. You’re not alone. Fifteen Million People each year that have actually generated income, cannot file their Federal and State tax returns. Now in the majority of these cases the individual tax payers do not owe anything and do not need to file. This depends on your earnings, your filing status and your age.
There are 2 categories for tax payers.
If you are a company owner or self utilized and have actually made over $400 in the tax year or in the past, you need to file an income tax return.
State Taxes are a bit various and you will have to discover your State’s local income tax page for the revenue requirements for your state.
The problem comes for taxpayers that by not submitting a Federal and State tax return, you are then going to be subject to additional collection actions by the IRS. My guidance is this. Even if you can not pay for to pay your tax financial obligation costs you should submit your go back to remain in compliance with the IRS. Pay exactly what you can. Even if you do not owe anything in taxes for that year their can be terrible effects for not filing.
A few of those repercussions of not filing your back tax returns are:
Penalties – By not submitting a Federal Tax return by the date (April 15th or the extension date typically October 15th) you are going to deal with failure to submit penalty of 5 % a month on the amount of taxes your owe. This penalty can not exceed 25 % of the balance of taxes owed. This 5 % penalty each month can be lowered by the failure to pay penalty when both charges take place in the same month. If your tax return is submitted more than 60 days after the due date, the minimum penalty is $135 or 100 % of the unpaid tax.
No Refund For You – The IRS is never ever going to pay you a refund if you owe them money. After 3 years of not filing your returns it is never ever going to happen.
Losses Carried Forward – If you don’t submit your returns the IRS is not going to understand about any losses you might have sustained. Usually you can offset your earnings by as much as $3000 and this amount can be carried forward. NOT if you do not submit. Gone
Substitute for Return – More frequently called a SFR. If you do not submit the IRS understands just how much you made from your W-2’s and 1099 forms. and they submit these replacement for returns. These are NEVER in your favor since they do not provide you any deductions you may be eligible for. They figure that if you wanted the reductions you would have submitted your returns. This is going to cause more cash owed to the IRS so instead of you being potentially owed a refund you now owe the IRS instead.
No Possibility of Bankruptcy – You can not file a bankruptcy in the courts if you have unfiled tax returns. All of your returns will searching for to be applied for at least 2 years before you can submit for a Chapter 7 and 4 years prior to submitting a Chapter 13.
Incarceration – It is really uncommon for you to go to jail for not filing a tax return, however it is a possibility. In truth under Federal law, you can put in jail up to a year and be released a $25k fine for each year you do not file a tax return. Often, the IRS may take a look at a non-filing as an attempt to avert taxes which will bring much stiffer fines and jail time. With concerns to State taxes, each state is different however many states do issue fines.
Collection Efforts Could Be Begin – Once you fail to file your tax returns and you are examined a tax quantity owed then the IRS can start collection efforts. These consist of Tax Liens, Tax Levy’s against your earnings called Wage Garnishment of levy’s versus your bank accounts.
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