What Happens When You Don’t File Your Tax Returns?
Haven’t filed your tax returns and are wondering exactly what the IRS can and will do to you. You’re not alone. Fifteen Million People each year that have actually generated income, cannot submit their Federal and State tax returns. Now in the majority of these cases the individual tax payers don’t owe anything and do not need to submit. This all depends on your income, your filing status and your age.
There are two classifications for tax payers.
If you are a company owner or self utilized and have made over $400 in the tax year or in the past, you need to submit an income tax return.
If you are a W-2 employee and have actually taxes taken out throughout the year it is a different story. There are minimum earnings thresholds and these modification practically every year. You are going to need to aim to see simply exactly what the minimum income filing requirements are for your age and exactly what your filing status is for that year. You can find this details in the yearly 1040 instructions that are supplied by the IRS.
State Taxes are a bit different and you will need to find your State’s regional income tax page for the revenue requirements for your state.
Charges – By not submitting a Federal Tax return by the date (April 15th or the extension date normally October 15th) you are going to deal with failure to submit penalty of 5 % a month on the quantity of taxes your owe. This penalty can not exceed 25 % of the balance of taxes owed. This 5 % penalty each month can be minimized by the failure to pay penalty when both charges take place in the very same month. If your tax return is submitted more than 60 days after the due date, the minimum penalty is $135 or 100 % of the unpaid tax.
Can I get a Refund If I Have Not Filed MY Tax Returns?
No Refund For You – The IRS is never 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 do not file your returns the IRS is not going to learn about any losses you may have sustained. Generally you can offset your earnings by approximately $3000 and this quantity can be continued. NOT if you do not submit. Gone
Substitute for Return – More frequently called a SFR. If you don’t submit the IRS knows how much you made from your W-2’s and 1099 types. and they submit these replacement for returns. These are NEVER in your favor due to the fact that they do not give you any reductions you might be eligible for. They figure that if you wanted the reductions you would have filed your returns. This is going to cause more money owed to the IRS so rather of you being potentially 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 tax returns. All of your returns will need to be applied for a minimum of 2 years before you can apply for a Chapter 7 and 4 years prior to filing a Chapter 13.
Incarceration – It is really uncommon for you to go to prison for not filing a tax return, however it is a possibility. In reality under Federal law, you can put in jail up to a year and be released a $25k fine for each year you do not submit a tax return. Sometimes, the IRS may look at a non-filing as an attempt to avert taxes which will bring much stiffer fines and prison time. With regards to State taxes, each state is various but numerous states do provide fines.
Collection Efforts Could Be Begin – Once you cannot submit your tax returns and you are assessed a tax quantity owed then the IRS can start collection efforts. These consist of Tax Liens, Tax Levy’s versus your salaries called Wage Garnishment of levy’s versus your checking account.