You might wonder, “what really happens if I don’t file my taxes?” Well, for starters, there will be some financial consequences from the IRS (Internal Revenue Service). The IRS is pretty intimidating, but there is no need to panic. You should not ignore the tax deadline, April 15th, in order to prevent any unnecessary penalties and letters. Keep reading to find out what really happens when you fail to file your tax return. Keep in mind, it is required that everyone files a tax return if they have earned income in the past year, regardless of whether or not you owe anything.
What Happens First?
You will receive a letter from the IRS stating that you failed to file your taxes and that you will face a small penalty. It is in your best interest to avoid this and file late because you do not want to end up with multiple letters from the IRS.
By not filing your taxes, you will be faced with a late filing fee. In 2020, the fee will be 5% of the taxes you owe for each month past Tax Day (April 15th, every year) that you fail to file. This penalty will be maxed out once it reaches 25%.
If you fail to file within 60 days of April 15th, however, the minimum penalty is 100% of your unpaid tax or $210 – whichever is less will be the penalty you pay. This penalty can and will accrue interest each day until your bill is paid in full, and if you continue to ignore the payments, the IRS can place a legal claim on your property and assets.
Another consequence of not filing your tax return is that the IRS can garnish your wages until you pay them. If you cannot afford to pay your tax bill in full, paying as much as possible on time is a great way to reduce the penalty.
What’s the Worst-Case Scenario?
The consequences for major cases of tax evasion include going to prison for up to five years, however, this is uncommon. The most common scenario for not filing your taxes on time is that you either file for an extension (before April 15th), or you accrue the aforementioned penalties. This means that if you owe $6,000, your penalty will be $1,500. Now, if you fail to file your taxes for more than 60 days, you will face a penalty that is double your tax bill.
It is best to avoid missing the tax deadline. Tax Day is the same day every year, so memorizing the date, April 15th, is a great way to prevent paying extra than you need to the IRS. The best practices for filing and paying your taxes is to be on top of them. Pay as much as you can and as soon as possible to avoid getting that pesky letter from the IRS. Contact us today to get your tax document ready for Tax Day.