What Happens if I Fail to File My Taxes?

Even though paying taxes are one of the constants in life, some people don’t file their returns for a variety of reasons. Some find it too difficult to gather all the information they need and simply choose not to complete their returns, while others might get really busy around tax season and forget to file.

For someone who fails to file taxes, it might seem better to just take no further action. However, failure to file tax returns can lead to a variety of damaging legal and financial problems down the road.

Why Should I Always File a Tax Return?

One of the big misconceptions about tax authorities in the United States is that they will let an unfiled tax return go. Advancing technology is making it easier for the Internal Revenue Service (IRS) to figure out who has not filed a tax return, even if they are a small business or an individual. Plus, if the government decides that someone was willfully negligent about filing taxes, they could then be subject to prosecution and punishment like fines and jail time.

It is still smart to file a tax return even if you do not think you will get a refund or owe anything. Credits like the Earned Income Tax Credit could still make it possible for someone to get a refund even if they are not required to file.

What Happens If a Tax Return is Not Filed?

Anyone who does not file a tax return will be subject to penalties from the IRS. Their failure-to-file penalty is usually 5% of the unpaid taxes for each month (or part of a month) that it is late. The penalties start the day after taxes are due, and will not be more than 25% of the unpaid taxes.

Since the penalties for failing to file a return are usually more then failing to pay, the IRS recommends that everyone should at least file their return on time even if they are not able to pay all of it. The IRS does allow late-filing fees to be waived if one can show a reasonable cause for not filing on time.

If taxes are not filed, the IRS might issue their version of a tax return, known as a Substitution for Return. People who receive one have the option to accept or refile. If there is no response, the IRS can then issue a notice of deficiency and begin the collections process.

What Should I Do If I Did Not File My Taxes?

If you did not file your taxes, it is in your best interest to fix the situation as quickly as possible. You should locate as much financial documentation as possible, get paperwork that might be missing, and find the most recent tax returns that were filed. An experienced tax attorney can then use all of the information you have to determine the best course of action to file unsent returns. They can also serve as an advocate for you with the IRS.

If you have questions about failing to file taxes, contact us today to schedule a consultation.

Posted in: Tax Audit

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