WHAT HAPPENS WHEN YOU DON’T FILE TAXES
February 13, 2022 - Douglas Myser
What happens when you don't file taxes. It may take some time for them to catch up to you, but they will. Unless you had a very good reason for not filing, like the people who had their tax papers destroyed in Katrina. We speak to an awful lot of people who have been involved in natural disasters, and have had to move, lost everything. Some had to move in with relatives for a few years to get back on their feet. In the middle of that most individuals forget to sent the IRS a change of address form, so sometimes its hard for the IRS to know where the family, or person is. But eventually they will find out. They share information with both Federal and State Agencies, and sometimes get the information that way. What happens when you don't file taxes.
When you don't file taxes, interest compounds daily and accumulates on the owed amount (the interest rate in equal to the Federal short term rate, plus three percent.) The late penalty is .05 percent of the principal amount that is owed, up to being five months late, or five percent per month which is 25% of the principal amount owed. For paying late you add another 5 percent. So even if you cannot pay, you should file your tax return, as the failure to file penalty of five percent per month, up to 25 percent of the principal owed is the worse of the penalties. If your return is over 60 days late the IRS can assess other penalties up to 100% of the tax owed.
If you owe taxes and have not filed for several years, your best bet is to contact a Tax Resolution Services firm, that will go over your options with you for dealing with your tax debt. If you call the IRS, you will get through to the Collection Division, and as the name say, they collect tax. They are not their to give you your Tax Relief options.