4 Ways that Taxpayers Can Get in Trouble for a Failure to File Income Taxes
- Author: Jeffrey Simmons
- Posted: 2024-05-17
The July 15 extended deadline to file taxes has come and gone. By now, you should have filed your taxes and claimed your refund or paid what you owe the IRS. If you did not file your taxes, you can end up in a world of trouble with the IRS. There are a number of different penalties that you will face as a result of not paying your taxes. Here are four possible negative repercussions that you may face if you have failed to file your taxes on time.
There Are Criminal Penalties for Failure to File
One of the most important things to remember is that failure to file your taxes is not just a civil issue. If you intentionally have failed to file, you can face criminal penalties. Willfully not filing taxes is a misdemeanor and can be punishable by prison time. By the time that the IRS discovers that you have not submitted a tax return, usually several years have passed. For each year that you do not file an income tax return, you can get one year in prison. The IRS has up to three years from the date where you should have filed to charge you with a crime.
The IRS Assesses Steep Monetary Penalties
Jail time is obviously a serious punishment, but you need to be concerned with more than that. The IRS can also hit you in the pocketbook hard for a failure to file. There are serious penalties for taxpayers who do not pay their taxes by the deadline even if they did file on time. This includes penalties plus interest. The IRS will charge a penalty of 5% per month on the amount that you owe if you have not filed your tax return. There is no limit on the amount of penalties that they can assess for a failure to file. In addition, the IRS will also assess interest, but that will pale in comparison to the failure to file penalties.
The IRS Will not Agree to a Repayment Plan
Another repercussion of a failure to file income taxes is the fact that the IRS may not agree to a payment plan with the taxpayer. The IRS may accept a compromise offer or can allow you to pay in installments over time. However, these flexibilities are reserved for taxpayers that are at least current in filing their taxes. Those who have not filed cannot qualify for a payment plan. If you have filed taxes years late, the IRS will likely not trust you enough to agree to work with you on payment of their taxes. Instead, they may proceed directly to seizing assets and bank accounts.
Your Wages Can Be Garnished and Bank Account Seized
Besides having a prosecutor file criminal charges, one of the next worst things that the IRS can do for failure to file returns is to garnish your wages if they determine that you owe taxes. The IRS can take a fair share of what you earn if you have not paid your taxes. In addition, the IRS has the power to seize your bank account or any other assets that they can find other than your home.
Many people fail to file tax returns because they know that they owe the IRS money and cannot afford to pay. However, that will actually make the problem worse. All the IRS sees is that a taxpayer has not filed their return. They will not guess at the reason why. They will assess penalties just the same regardless of the reason that you have not filed taxes.
Thus, the best thing to do if you have not filed tax returns out of fear is to file them immediately. If you file now, there is still a chance that the IRS may try to work with you if you explain yourself. It is always best to begin the conversation with the IRS from the vantage point of having filed taxes, albeit even if late. The inverse is that the IRS catches a taxpayer for a failure to submit a tax return. Then, they will have no reason to talk. Filing now will not get you out of the penalties that you owe, but it may help you agree to a payment plan with the IRS so that you can begin to work your way out of your tax debt.
