Have not filed your income tax return and are questioning what the IRS can and will do to you. You’re not alone. Fifteen Million People each year that have earned money, fail to file their Federal and State tax returns. Now in the majority of these cases the individual tax payers do not owe anything and do not have to file. This depends on your income, your filing status and your age.
There are two categories for tax payers.
If you are a business owner or self employed and have made over $400 in the tax year or in the past, you have to file an income tax return.
If you are a W-2 staff member and have taxes gotten throughout the year it is a various story. There are minimum earnings limits and these modification nearly every year. You are going to have to aim to see simply exactly what the minimum income filing requirements are for your age and what your filing status is for that year. You can discover this details in the yearly 1040 instructions that are supplied by the IRS.
State Taxes are a bit different and you will need to discover your State’s local income tax page for the revenue requirements for your state.
The issue comes for taxpayers that by not filing a Federal and State tax return, you are then going to undergo more collection actions by the IRS. My recommendations is this. Even if you can not manage to pay your tax financial obligation expense you should file your go back to stay in compliance with the IRS. Pay exactly what you can. Even if you do not owe anything in taxes for that year their can be terrible consequences for not submitting. A few of those repercussions are:
Charges – By not filing a Federal Tax return by the date (April 15th or the extension date generally October 15th) you are going to deal with failure to file penalty of 5% a month on the amount of taxes your owe. This penalty can not exceed 25% of the balance of taxes owed. This 5% penalty each month can be lowered by the failure to pay penalty when both charges occur in the exact same month. If your tax return is filed more than 60 days after the due date, the minimum penalty is $135 or 100% of the unpaid tax.
No Refund For You – The IRS is never ever going to pay you a refund if you owe them money. After three years of not submitting your returns it is never ever going to take place.
Losses Carried Forward – If you don’t file your returns the IRS is not going to learn about any losses you may have incurred. Generally you can offset your income by as much as $3000 and this amount can be continued. NOT if you don’t submit. Gone
Alternative to Return – More commonly called a SFR. If you do not file the IRS knows what does it cost? you made from your W-2’s and 1099 types. and they file these substitute for returns. These are NEVER in your favor since they do not provide you any deductions you might be eligible for. They figure that if you desired the deductions you would have submitted your returns. This is going to cause more loan owed to the IRS so instead of you being possibly owed a refund you now owe the IRS instead.
No Possibility of Bankruptcy – You can not submit a bankruptcy in the courts if you have unfiled income tax return. All your returns will have to be filed for at least 2 years before you can declare a Chapter 7 and 4 years before submitting a Chapter 13.
Imprisonment – It is very rare for you to go to jail for not submitting a tax return, however it is a possibility. In fact under Federal law, you can put in prison as much as a year and be released a $25k fine for each year you do not file a tax return. Often, the IRS might take a look at a non-filing as an attempt to evade taxes which will bring much stiffer fines and prison time. With regards to State taxes, each state is various however numerous states do release fines.
Collection Efforts Could Be Begin – Once you fail to submit your tax returns and you are evaluated a tax quantity owed then the IRS can begin collection attempts. These include Tax Liens, Tax Levy’s versus your earnings called Wage Garnishment of levy’s against your checking account.