Most individuals do not look forward to filing taxes unless they know they will receive a refund. While many accept that they must file taxes every year, some don’t file taxes or they file taxes late. When you don’t file taxes, you face severe IRS penalties if you owe the IRS, and your tax debt will be even bigger.
What Happens If You Don’t File Taxes?
If you don’t file taxes and you owe taxes, you can be hit with both a Failure to File Penalty and a Failure to Pay Penalty. Penalties and interest will be added to what you already owe until you file your tax return and pay your taxes in full. Even if you do not owe taxes and you are expecting a tax refund, you will lose that refund if you don’t file taxes within 3 years of the due date.
If you need more time to file taxes, you can request an extension to file, but you will still have to pay taxes you owe the IRS by the original tax deadline.
Read more: Filing Taxes Late: What If You Missed Tax Deadline or Have Past Due Returns?
Is It Worse If You Don’t File Taxes or You Don’t Pay Taxes by the Due Date?
Although both failing to file taxes and failing to pay taxes are bad, it is worse if you don’t file taxes. The Failure to File penalty (FTF) is 5% of what you owe the IRS for each month until you file taxes. FTF caps at 25% of unpaid taxes.
If you cannot pay taxes by the due date, pay what you can and request a payment plan or installment agreement with the IRS for your remaining tax balance. If you do not pay anything by the tax due date, you will be charged a Failure to Pay penalty (FTP), which is 0.5% of the taxes you owe for each month until you pay the IRS in full. Like FTF, FTP caps at 25% of unpaid taxes.
Should You Still File Taxes If You Can’t Afford to Pay Taxes?
Yes, you should always file taxes on time and pay what you can of taxes owed. This reduces the penalties and interest for which you will be responsible. When you have past due tax debt, the IRS can also seize your refund to offset unpaid taxes.
If you can’t afford to pay taxes, the IRS offers Fresh Start Initiative tax relief programs to help settle tax debt. IRS tax relief programs include Offer in Compromise to settle for less than what you owe; payment plans and installment agreements to pay what you owe over time; and Currently Not Collectible to temporarily delay collections if you are experiencing a financial hardship.
Do You Have to File Taxes If You Don’t Owe the IRS?
You should file an income tax return if you meet the minimum income requirements for filing taxes. Even if you do not owe the IRS money, it is best to get the return filed so you are not ever accused of failing to file. Also, if you qualify for a tax refund but don’t file taxes, you risk losing your refund if you file too late.
Will You Lose Your Tax Refund If You Don’t File Taxes?
The IRS will not issue a refund if you don’t file taxes. The only way you’ll receive your tax refund is to file your tax return. Keep in mind that if you don’t file taxes within 3 years of the original due date, you will lose your refund even if the IRS owes you money.
Can the IRS File Your Taxes for You If You Don’t File Taxes?
Yes, the IRS can file a tax return for you. When the IRS files for you, it’s called a substitute return. The issue with an IRS substitute return is that you will not get any of the credits or deductions that you would get when you file the tax return yourself. You could end up owing more taxes if the IRS files your return for you.
Is There a Time Limit for the IRS to Collect Taxes If You Don’t File Taxes?
The IRS statute of limitations to collect back taxes you owe is 10 years. This 10-year date is often referred to as the Collection Statute Expiration Date or CSED. Your CSED is either from the date that the return was due or the date that it was filed. The time starts on whichever of those occurs later.
There are several situations that stop the clock or prevent it from starting, so never think that the 10-year Collection Statute Expiration Date is absolute.
It is always best to get your taxes filed so you do not face legal trouble or financial penalties. If you don’t file taxes that you should, you want to make things right with the IRS as soon as possible. They will not give up on trying to collect taxes you owe, so do not think that you can just ignore taxes and IRS collections.
How Can Wiztax Help?
As noted above, you should always file your taxes. If you owe the IRS and can’t pay, call us today at (866) 568-4593 to learn more about all your options.
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