Few people enjoy filing income taxes. But when you can't pay your tax bill, the process may become so daunting that you simply decide not to file altogether. However, there are many reasons why this could put you in an even worse situation. How so? Here are five potentially expensive and stressful consequences of failure to file.
No Statute of Limitations. Generally, the IRS has three years in which to assess tax. It then has 10 years to pursue getting payment for tax due. However, complete failure to file a tax return means that the IRS is not subject to these limitations and can assess tax at any time. Then, the agency would have an additional 10 years to collect on it.
IRS Assessment. If you don't file a tax return, the IRS may assess your income tax for you based on their information. For some taxpayers with simple returns — such as only Form W-2 wages and no children — this might work out to the same result as filling out the forms yourself. However, if you can claim any deductions or credits that the IRS doesn't know about, you could lose a lot of money. For instance, if you can file as a head of household or claim education or child tax credits, you may end up with an unwarranted tax bill.
Refund Forfeiture. If you don't file within three years of the original due date for a tax return, you likely will not get any refund due for that year. But you'd still owe taxes for that or other years. Even if you are wary of filing because you think you will owe, you would do well to make sure that it's really the case. A professional tax preparer might calculate a refund instead, but you won't get to claim it if you wait too long.
Penalties and Interest. Interest begins accruing as soon as the deadline for tax filing has passed. If you wait to file months or years after that, interest will likely be charged during all the intervening period. In addition, you may be subject to additional penalties for failure to file the return itself.
Tax Levies. If the IRS has determined that you owe taxes based on their records, they will begin collections procedures. At first, this means a number of official notices through the mail. But if the bill isn't paid, collections could escalate to liens and levies. A levy allows the IRS to seize property in order to satisfy the debt. That property could include hard assets like a vehicle, future state refund checks, bank account funds, and even your Social Security checks when you retire.
Filing income taxes can be stressful, but failing to file them could make things even worse. Your best course of action is to seek out an experienced tax preparation service as soon as possible. Together, you can start work on a plan to move forward with confidence and a manageable course of action.
For more information on tax preparation, visit a website like http://www.tri-check.biz.Share