Consequences of Not Filing or Paying State Taxes - Tax Group Center

Are you in serious trouble if you don’t file your taxes? Many people are unaware of what happens if you don’t file taxes. Some assume that you’ll be jailed. Others believe it’s actually possible to keep a secret from your state or the IRS. 

The truth is somewhere in the middle. Back taxes can get you on the radars of both the IRS and state taxing authorities pretty quickly. Let’s take a look at the consequences of not filing taxes.

What Happens If You Don’t File Taxes?

The consequences of not filing taxes are quite severe. In fact, the total penalty you face for a combined offense is 10 times greater than if you simply didn’t pay a tax bill. Many people are unaware of the fact that the IRS uses sophisticated methods to keep track of who is or isn’t filing in any given year, so they will be aware if you don’t file. What’s more, your employer will be reporting the income you’ve earned even if you don’t.

What Are the Consequences of Not Filing Taxes?

The IRS will essentially file your taxes for you using something called a Substitute for Return (SFR) if you don’t file late tax returns on your own. Unfortunately, the IRS will give you the worst deal possible when it comes to your deductions, exemptions, and credits. You’ll be doing yourself a favor if you file, even if you’re concerned that you can’t pay what you owe.

What Are the Penalties for Not Filing Taxes?

First, you won’t receive your tax refund until you file your tax return – and you could lose your right to ask for your refund if you go three years without filing. In addition, a failure-to-file penalty that equals 5 percent of your unpaid taxes for each month your return is late will apply automatically. A minimum fee of $135 will be tacked on to that if you don’t file within 60 days of your due date. Most states also have their own failure-to-file penalties. 

The consequences of cheating on taxes are a bit harsher. You face a civil penalty of 75 percent if your tax issue is the result of fraud instead of negligence.

You’re also facing some harsh collection penalties if you don’t file or pay taxes. Most states join the IRS by having standard collection procedures for taxpayers who don’t pay what’s owed. Unfortunately, you can end up owing much more than your actual tax bill if you continue to avoid the problem. The big thing you’re facing is interest. In addition, the IRS and state taxing bodies can do what’s necessary to collect what is owed even if you will not cooperate. This often includes things like liens and levies, as failing to file and pay taxes means that the IRS can seize bank accounts and physical assets. The IRS can also go around you by requesting a wage garnishment from your employer.

How to Avoid the Consequences of Not Filing Taxes

There’s a good chance that the IRS will be willing to work with you to get your tax situation settled using one of the options under its Fresh Start program. You may be able to get your tax debt reduced or divided into manageable payments. The important thing is that seeking a settlement with the IRS will almost certainly put a freeze on the harsh penalties and collection efforts you’re facing. There are many options to explore that can help you to put this issue behind you!

What Should You Do If You Haven’t Filed Taxes?

It’s important to get all of your outstanding tax returns filed as soon as possible. The IRS and state will find out if you have an unfiled tax return; the IRS is more interested in getting that return filed than it is in applying harsh penalties. A late return is better than no return any day of the week. In fact, many of the relief options that are available from the IRS will become accessible to you once you’re caught up with tax returns.

Get Current With Your Taxes

At Tax Group Center, we’ve seen what happens if you don’t pay taxes. That’s why we’re so passionate about helping our clients get current with tax filings. You may find that all of the fear and anxiety you’ve been having over unpaid or unfiled taxes evaporates once you have a plan of action in place. Our team will explain all of the options that are available for getting in good standing again. We’ll help you get filed, get your refund, and seek relief. Call today!