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What Are The Consequences of Not Filing Your Taxes or Filing Them Late

Triston Martin

Oct 23, 2023

Have you missed the tax return filing deadline or been unable to get an extension? The Internal Revenue Service has the authority to assess two different penalties: for failing to file a return and for failing to pay any due taxes.

There are ways to reduce the severity of these fines, but disregarding your tax filing responsibilities is rarely a good idea. You can find potential punishments and strategies to mitigate them below.

Is There a Cost Associated with Not Filing Taxes?

If you don't file your tax return or request an extension before the due date, the Internal Revenue Service will assess a failure to file a penalty. That fee is calculated from the total amount of taxes owed and the return filing date.

The failure to file a penalty imposed by the IRS is 5% of your unpaid taxes every month, or a fraction thereof that your tax return is late. Only up to 25% of your back taxes will be assessed.

Can You Please Explain The Fee For Making a Payment Late?

If you don't pay your whole tax bill by the deadline, you'll have to pay still another penalty. Each month, or fraction thereof, your tax bill goes unpaid and incurs a penalty of 0.5% of the total amount due.

The late payment penalty is set at 25% of the delinquent taxes, like the failure to file a penalty. The IRS will subtract the failure to pay the penalty from the failure to file the penalty if both apply to your situation.

What Happens If You're Due a Refund?

You won't get dinged by the IRS for being late with your tax return if you're due a refund. Still, you should get your return in as soon as possible for two excellent reasons.

Refund Requests

Your tax refund might be lost if you wait too long to file your return. A tax return must be filed, and a refund claimed within three years.

The clock begins ticking during those three years from the initial tax return deadline. Take the 2019 tax return as an example; the due date was July 15, 2020.

Commence Statute of Limitations

The IRS has a three-year window in which to audit tax returns. The law restricts how long you have to file a lawsuit. Some notable outliers exist, though.

The IRS has an additional three years to investigate claims that you have significantly underreported your income (by 25% or more). Time begins to run after the return is submitted.

Avoiding The Failure-To-File Fee

Filing your return on time or requesting an automatic six-month extension is the easiest method to avoid failing to file a penalty. If you cannot pay your taxes in full by the April 15 deadline, you may request an extension by filing Form 4868 and sending it to the IRS along with your payment by Direct Pay, the Electronic Federal Tax Payment System, or a credit or debit card.

Even if you need more time to submit your taxes, the finest tax software will automatically file an extension for you. You should submit your taxes and remit any overdue payments as soon as possible if you cannot do so on time.

If You Can't Pay Your Taxes, Here's What to Do

Not submitting your taxes because you can't afford to won't help you escape fines. It's important to file as soon as possible and choose one of the following payment plans.

Get An IRS Payment Plan Set Up

You can have up to six years to pay your tax debt with an installment arrangement from the Internal Revenue Service. The IRS still assesses late payment penalties and interest during an installment plan, but it lowers the penalty to 0.25% of the total outstanding amount.

Make A Compromise Offer

When you file an offer in compromise with the Internal Revenue Service, you might negotiate a reduced payment plan for your tax debt. On the other hand, it is usually reserved for taxpayers in extreme monetary need. The IRS has a tool called the Offer in Compromise Pre-Qualifier that can help you determine if you qualify and your potential offer amount.

What Consequences Do You Face If You Fail to File Taxes?

The IRS may submit a return on your behalf if you fail to do so. A "substitute for return" is what this is. The IRS may submit your return for you, but doing so will undoubtedly result in a far larger tax bill than if you did it yourself.

This is because the IRS uses your W-2s, 1099s, and other tax documents to calculate your SFR. In most cases, the forms only include questions about earnings and not any regarding deductions.

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