Consequences of Unfiled Taxes - By: Matt Robinson

Are you under the impression that unfiled taxes are no big deal? The IRS does not feel the same way. Many people avoid filing a return because they don’t have the money to pay. While this may sound fine on the surface, you should note that penalties and interest can be added to your account. So, in the long run it is actually much worse if you don’t file. Even if you don’t have the money to pay it still makes sense to file your return and to file it on time. At that point, you can work with the IRS to determine how you are going to pay your balance.

What are the consequences of unfiled tax returns? To start, there is a failure to file penalty. If you do not file your taxes when owed the IRS will charge five percent of the amount due for each month the taxes are unfiled. The maximum penalty is 25 percent. That being said, the penalty can reach 75 percent if fraud or negligence is involved. Compare this to a penalty of .5 percent per month for taxes that are filed and not paid. Now which option looks better to you? In short, it is better to file and not pay than to not file at all.

In many cases, if you miss the original filing date you may lose out on potential tax credits. Without these, your taxable income is going to be much higher. In turn, you are going to owe a lot more money.

What about a loss of refund? If you are owed money from the IRS and do not file your return within three years of the due date you will lose your right to any refund. This alone should be enough to scare you into filing on time. If you are late the IRS may get to keep money that is rightfully yours. How does that make you feel?

If you have unfiled and unpaid taxes the IRS will eventually file a return for you. In turn, they will determine how much you owe and then begin the act of collecting the money due. The IRS has the right to legally seize your assets through a tax levy.

As you can see, the consequences of unfiled taxes run deep. These penalties are much greater than those associated with not paying on time. Even though it is not common, the IRS has the right to fine individuals who do not file on time. Again, this is not common but it can happen. The longer you wait to file your return the more you are going to owe in penalties and the deeper the hole you are digging yourself.

Now that you know the consequences of unfiled taxes there is a good chance that you will do whatever it takes to file on time. It is better to file and not be able to pay in full than to avoid filing and hope that the IRS does not catch on.

About the Author

For more information about unfiled IRS taxes at http://www.taxdebthelp.com/tax-problems/unfiled-tax-returns. Connect with top tax professionals that can resolve your unique tax problem while taking into account your current and future financial situation.

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