What Are the Penalties for Not Filing Your Taxes?
It is tempting not to pay taxes especially since there are millions of taxpayers. Surely, you would think you will not be noticed. You are dead wrong, however, as the IRS will know. It is then imperative to know what the consequences for not filing your taxes are, what you have to do if you were not able to do this obligation, and where to ask for assistance.
You will probably believe that not filing for your taxes is a small thing but the government perceives this as stealing and considers it an offense. There are many levels of penalties depending on your tax status:
* Filing for taxes late
* Not filing for taxes at all
* Not paying taxes
Aside from being called a delinquent tax payer, a number of serious consequences await you as a result of your actions. Let’s tackle one by one the above-mentioned penalties.
It is easiest to deal with penalties resulting from late filing of taxes. The IRS charges you with a monthly penalty of 5%. Tax returns filed in June when it is due on April 15 gives you an interest of 15%. The maximum penalty is 25%.
What options do you have if you still have not filed your tax return and April 15 is already fast approaching?
Should your circumstances call for an extension in filing for your taxes, you may contact the IRS. You can go about this request by filling out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Once the request is approved, you are allowed until August 15 to take care of your tax returns. If this period is inadequate, filling out Form 2688 gives you more time. It is imperative that you file for an extension as doing otherwise automatically gives you the 5% interest.
You do not buy time to pay for your taxes when you file for an extension. The law provides that you should pay at least 90% of the total taxable income or else you will be given a monthly penalty of 0.5% With this, we are now ready to tackle the next type of penalty.
If you can’t afford to pay for the total amount, you must at least settle part of it. There are bigger charges for not filing than for not settling the whole amount. For example, you owe $5000. If you pay even $1000, you only have to pay a penalty of 0.5% on $4000, which is only $20.
The IRS may impose more severe measures should the agency see that you continue to be a delinquent tax payer. First, the penalty increases 1% monthly. Then, the IRS may request you to mortgage assets or get a loan. More importantly they may opt for wage garnishment and levying bank accounts.
Before situations get overwhelming, refer to the IRS for help. You will see that they are not the Big Bad Wolf that they were portrayed to be. You may ask them for 30-120 days extension. A friendly payment plan may also be set up. Other forms of IRS help include installment plans, temporary delays and Offer in Compromise, among others. Click on the IRS website for more information on these alternatives.
The penalty for not even bothering to file your taxes is most critical. You will be charged 5% of the amount you owe, per month. The maximum penalty for this infraction, however, is 25%. Take for instance you owe $5000 and you filed 5 months after the deadline. To calculate your penalty, you need to multiply 5000 by 25%. This puts on another $1250 to your bill. More notably, this situation does not make it easy for you to ask for assistance from the IRS.
If a taxpayer repeatedly refuses to file, the IRS can fill out a return for him and mail the bill, plus fees. The IRS-completed return will not give the taxpayer deductions he would otherwise be entitled to. The IRS may press for criminal or civil charges should the above move prove to be unsuccessful. To refrain from arriving at these unfavorable situations, ask for the help of the IRS. For sure, you can arrive at alternatives that will not effect to serious consequences.
Filed under Blog by on Nov 7th, 2009. 