What happens if you don't file taxes?

 

What happens if you don't file taxes?

The tax filing deadline is usually April 15 each year. However, for 2022 taxes, the deadline for most people to file is April 18. This deadline can also be extended to October 16 with a few problems.

Although tax payments are due by April 18, the inability to apply on time can happen for several reasons, from simple forgetfulness to unexpected emergencies.

No matter what might cause a person to miss the tax filing deadline, there are potential consequences. This is what happens if you don't file taxes.

What happens if I file taxes late?

Again, the April 18 deadline is for tax payments to be made. Individuals can apply for an extension to file later in the year.

However, if April 18 passes before you make your tax payments, two different things may happen, depending on your status as a taxpayer.

What happens if you don't owe taxes or get a tax refund?

Most Americans get a tax refund after filing their federal and state taxes. This happens when you pay more in taxes over the year than you owe. Most employers withhold money from each paycheck, which goes to your taxes—but those withholdings usually don't represent the deductions and credits you might qualify for, resulting in the government requiring it to be paid back to you in the form of a tax refund.

If you fall into this category because you don't have taxes to the government or you owe a tax refund, there is no penalty for not filing your taxes. However, you will not receive a tax refund after submitting your taxes. There will be no penalty for filing late; bring the paperwork to the IRS so they can process your taxes and issue your refund. Technically, you have three years to file taxes and get a refund.

What happens if you owe taxes?

If you're self-employed or don't have money withheld from your paycheck, chances are you'll owe the government money when you file taxes. If you fail to file your taxes by April 18, you could face penalties because you owe the government money.

You can delay some of these penalties by filing for a tax extension. This gives you an extra six months to file taxes, giving you spare time to get everything in order and delaying some penalties you could face if you don't rub. Submitting an extension will prevent the government from penalizing you for not applying. Your tax payment is due by April 18, regardless of when you filed. Possible penalties and interest may apply for not making payment on time, irrespective of whether you extend the application deadline.

You must apply for an extension or use it by the extended deadline to avoid facing penalties. Failure to file penalties results in a 5 percent monthly penalty on unpaid taxes, up to a maximum of 25 percent. Here's how it breaks down:

First month: 5% tax liability

Second month: 5 percent of your tax liability (after 60 days of delay, the minimum for failure to file a penalty is $435 or 100 percent of your tax liability, whichever is less)

Third month: 5% of the tax liability

Fourth month: 5% of the tax liability

Fifth month: 5% of the tax liability

There are some instances, including natural disasters and military service, in which the government forgives not signing penalties. But unless you are subject to one of these exemptions, expect to pay the fine. The IRS can also recommend that people who fail to file their taxes be jailed, although such cases are rare.

State laws vary greatly, so check your local laws for not filing.

What happens if I pay taxes late?

Whether or not you file your taxes, you owe the government money, and the government expects payments to be made on time. This means that not paying your taxes on time can also result in penalties. Whether you file your taxes or not, the IRS will notify you of what you owe. Failure to pay this amount by its due date, April 18, will result in daily and monthly penalties.

Each month you fail to pay your taxes in full will result in the IRS assessing a penalty of 0.5 percent of your total tax liability. This will continue each month, up to 25 percent of your tax bill due.

Interest is also accrued on any taxes owed, which begins on the first day your taxes are not paid and accrues daily until the bill is paid in full. The interest will be set by the current short-term federal interest rate plus an additional 3%. The short-term rate changes every three months, so your interest rate may go up or down depending on how long it takes to pay taxes in full. However, allowing it to accumulate long-term can result in hefty and large fines. The IRS can also seek to jail people for failing to pay their taxes, but it's extremely uncommon for that to happen—especially if your tax bill doesn't run into hundreds of thousands of dollars or more.

State laws vary greatly, so check your local laws for non-payment.

What happens if you last paid taxes in years?

If you last paid your taxes in years, the IRS will likely seek to recover that money from you in several ways. This may include earning wages from your salary, foreclosure of your home or any other high-value property, or coming directly to your bank account. The IRS may also withhold future tax returns until your tax bill has been paid.

There are other penalties you may face as well. If you owe more than $55,000 in taxes, the government can refuse to issue you a passport. The IRS may also refer your tax payments owed to a private collection agency, which will likely be more aggressive in recovering the money.

There is a 10-year limitation law on unpaid taxes, which means in most cases, the IRS can't follow up on taxes owed dating back a decade. There are some exceptions, but the agency must forgo collection efforts in most cases.

Two steps to take if you fall behind on taxes

If you have fallen behind on your taxes or have not paid your taxes in years, there are several steps you can take to help ease the pain that penalties and interest for unpaid tax liabilities may cause you.

Determine how much you owe: Before paying, you must know how much you owe the IRS. You can determine this by requesting your transcripts from the IRS. Even if you last filed taxes in years, you'll be able to see the IRS's information and how much the agency thinks you owe based on the information it has access to.

File Your Taxes: You better do so if you still need to file your taxes. Contact your employers and ask for a copy of your tax documents. They should be on hand and be able to provide these records. When you apply, you may owe a refund that can help reduce your tax bill.

What do you do if you can't pay taxes?

If you cannot pay your taxes, you must contact the IRS and let them know. The agency is more interested in collecting what it can than penalizing you and will likely work with you to set up a payment plan or installment agreement. Payment plans still have some interest and penalties but fewer penalties for those who don't pay. However, failure to pay may result in the government demanding the full amount and terminating the installment plan.

If you tell the IRS you can't pay, they're also open to negotiating a smaller payment. Often, the IRS will reduce your overall tax burden if you are willing to pay the amount in installments.