5 Consequences of Filing Late Tax Returns
Not filing an income tax return can actually land you behind bars! It’s a very rare occurrence because the IRS would rather not have to spend taxpayer money to support incarcerated people. However, it has happened before on rare occasions.
If you’ve ever thought that you could avoid the hassle filing a tax return simply by putting it off, then think again. At Success Tax Relief, we’ve seen plenty of people who try to avoid the process for as long as possible until bad things start to happen. In most cases, you’ll find some penalties levied against you or something similar. While few people like the IRS, you do have to give them credit.
They at least give you fair warning as much as possible before they resort to any of the following five unpleasant tactics!
1. Late Fees & Penalties
Perhaps the single most pressing and scary consequence of filing a late tax return is getting slapped with a big late penalty from Uncle Sam. If you’re expecting a refund, then you might not get too much of a scolding. You might end up losing some portion of said refund, though. People who owe the government money get the worst punishment, however. Late filing penalties kick in immediately following your deadline. Come April 16, the IRS starts counting days. You’ll typically have to pay something like 5 percent of the unpaid sum for each money you delay filing your return. The IRS won’t stop increasing this value until you get to 25 percent in most cases!
2. Loss of Your Refund
While it’s not quite as scary as getting stuck paying late fees, nobody wants to lose out on a refund they have coming to them. If you’re owed money back from the federal government but don’t file on time, then you could end up getting less than you expected. Those who take an extra long time might forfeit the entire sum, which is an especially big problem for anyone who needs that money to make necessary purchases or pay an outside debt.
3. Substitute for Return Filing
Individuals who fail to submit a return will start getting hounded by the IRS. If they still don’t listen, then they could end up getting a substitute for return document filed against them. When the IRS does this, they calculate the amount of taxes owed based on taxable income and add that to all the penalties that have gotten accrued from the start. If you’re self-employed, then they’ll look at the money you have coming in from your independent business. Even if you just earn interest on the account, the IRS will use this as income. Once they’ve filed this, there’s a chance you’ll get a nice big bill in the mail.
4. Wage Garnishment
Taxpayers who continue to shirk their responsibilities might end up having their wages garnished. In the worst case scenario, you could even have your assets seized. There have been reports where people find that a vehicle or other piece of personal property gets taken away because they’ve been negligent about taxes for a very long time. Granted, the IRS treats this as a last resort. They don’t want to do this if they can avoid it. However, in a dire situation, they might end up forced to.
5. Possible Arrest
It’s important to stress that this one is really rare, but there have been cases where people evade their taxes for so long and never file a return that they actually do end up getting arrested for it. The IRS will generally try every avenue to finish their unpleasant business before resorting to this one. You could say it’s the last resort among the last resorts. However, there is a risk you could wind up in prison if you don’t ever take the step of filing a return.
Now, keep in mind that you don’t have to start worrying right now if you haven’t taken the opportunity to file and you’re late on some things. Take a deep breath because tax professionals are standing by to help you solve whatever issue you might find yourself in. Even if you’ve been negligent with taxes for a while, there’s still plenty of time to work things out.
Contact us now at Success Tax Relief and we’ll work with you to resolve your tax problems as quickly as possible. We might even be able to work out a deal with the IRS so you can settle your debt for less than you owe!