About Unfiled Taxes?
Filing tax returns annually poses significant challenges for wage earners, particularly for small-business owners or 1099 employees. The complexity amplifies, making the process daunting.
While some anticipate tax season for potential refunds, others confront substantial tax liabilities, posing financial risks.
When facing the prospect of unaffordable tax bills, taxpayers may hesitate to file, fearing the consequences. However, avoiding tax filing due to this apprehension is detrimental, especially if one owes back taxes.
What Happens If I Don't File?
The repercussions for neglecting to file tax returns can be severe, escalating the challenges for delinquent taxpayers.
Failure to file taxes is legally deemed a serious offense.
It can potentially constitute tax evasion, a criminal act.
However, due to the significant number of taxpayers who fail to file annually, the IRS does not prosecute each case immediately. Instead, tax evasion charges typically arise after prolonged evasion of IRS collection efforts.
Though the IRS may not take immediate action, avoiding filing taxes is ill-advised.
Long-term consequences may include restricted access to loans, asset seizure, fines up to $25,000, or even imprisonment.
Delayed tax refunds are a common consequence of late or unfiled taxes, accruing penalties from April 16th onward. The IRS sends a sequence of letters (CP515, CP516, CP518, and CP515B) to prompt compliance.
Tax Refund Forfeiture
Taxpayers have a three-year window from the return’s due date to claim a refund. Beyond this period, refunds are forfeited to the U.S. Treasury.
In 2019, unclaimed taxpayer refunds totaled over $1.4 billion.
Late Penalties
Failure to file by April 15th incurs an immediate 5% monthly penalty on the owed amount.
Late payment penalties are applied at a variable rate of 0.5% to 1% monthly on the unpaid balance.
Filing for an extension can extend the deadline to October 15th, but requires timely submission and approval.
In summary, filing taxes promptly is essential. Early filing allows time to settle taxes or request extensions, mitigating potential penalties and consequences.
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