- October 17, 2021
- Posted by: blogtester
- Category: Uncategorized
There are serious consequences if you don’t file or pay taxes, regardless of your financial status. With that in consideration, here’s a rundown on what happens if you don’t submit your taxes.
If you don’t pay your taxes, you’re likely to face the following consequences:
- You’ll have an ever-increasing debt.
- Your creditworthiness may suffer as a result.
- Your financial situation may deteriorate.
- You’ll waste more time and money cleaning up after yourself.
What Happens If You Don’t File or Don’t Pay Taxes?
The two most common reasons in this context are failing to file your tax return on time and paying your taxes on time. You don’t want to postpone filing your tax return or refuse to pay your taxes entirely. So, if you don’t strive to file your income tax debt, the government has the power to acquire your assets. In the most serious cases, you may have to suffer from imprisonment. Also, you may experience penalties and interest costs in a variety of situations.
Let’s understand both the context.
Filing Your Taxes Late
If you cannot file your tax return by the time frame, you must file a request for a time extension. For this, you can send Form 4868 to the IRS by the deadline.
It’s crucial to note that submitting this form does not provide you a time extension to clear your tax debt. You still have until the deadline to submit any amount you owe.
Failure-to-file fines apply if you file your tax return later or forget to file at all. You will have to pay these fees if you do not file the returns in the given deadline (or prolonged due date if you’ve filed a Form 4868).
Filing late, even without or with an extension, doesn’t really pay off. Even though you don’t have the money to meet your existing tax bill by the deadline, you should still file your tax return to avoid additional penalties and interest for failing to file.
Paying Your Taxes Late
You may wish to file your tax return but not make the payment owed to you. If you don’t pay your taxes by the deadline, you’ll start accruing interest and penalties on the amount owed.
Failing to pay interest makes you pay the federal short-term rate with addition to 3%, compounded every day after the deadline.
Further, the failure-to-pay penalties calculate at 0.5 percent of the outstanding tax liability for each month, if you do not pay the debt, up to the maximum of 25%. Failure-to-file and failure-to-pay penalties apply if you have not submitted your tax return or settled your tax liability.
The IRS may impose charges if the amount is not paid for a long time. An IRS charge is a legal process involving confiscating your assets to pay off an outstanding tax bill. So, levies can take various forms. For instance, garnishing your salary through your job, confiscating your assets outright from a bank account, or seizing and disposing of your assets, such as a car or a house.
The Worst-Case Situation
Facing penalties, interests, and charges for tax evasion would be unpleasant. However, most people seem to agree that going to prison would be the worst-case situation.
So, is it possible for the IRS to imprison people? Yes.
For tax evasion, a jail sentence is a genuine possibility. Several high-profile examples demonstrate this. Moreover, tax evasion carries a three to a five-year prison sentence, and it is not only reserved for celebrities. Anyone who tends to hide money from the government or a record of disobeying US tax law faces a jail sentence and a criminal history. In addition, you will have to return their taxes plus costly fraud fines and interest.
Financial penalties will swiftly mount if you do not pay your taxes. If you don’t file your tax return by the deadline, the IRS will charge you a fine of 5% for up to five months. This will be on the amount outstanding. If you file your tax return more than two months after the deadline, you will be charged a penalty. It will be equal to the lesser of 100 percent of the tax owed on your return or $435.
In addition, the IRS will charge interest. Additional to any late fines, interest will be charged. The amount of interest owed is calculated using the federal short-term rate (typically between 1% and 4% ) + 3%, for a total of 4% to 7%.
The IRS has the legal authority to collect taxes from your employer directly by deducting funds from your paycheck. They can also examine (and wipe) your bank accounts, place a claim on your home or automobile, and even seize property to collect taxes.
The IRS can call you for court hearings, withhold your social security benefits, and withhold future refunds if the IRS finds evidence that you have evaded your tax liabilities. One of the most powerful IRS punishments for ex-pats is the IRS’ ability to work with the US State Department to cancel your passport or refuse to renew your child’s passports.
Finally, the IRS has several legal tools at its disposal for punishing US individuals who try to avoid paying their taxes. The IRS uses various tactics to enforce the tax code, including jail time, financial fines, withhold wages, and the confiscation of personal property. Our tax relief attorneys at Platinum Tax Defenders will provide consultation and answers to assist you in resolving your tax obligation in the least unpleasant manner possible.