No one really likes filing their tax return, but it’s one of those things you just have to do. Wondering what happens if you don’t take the time to file your taxes? Keep reading to find out.
If you owe tax, and you fail to file a tax return, you’ll face serious tax penalties. The failure-to-file penalty amounts to 5% of the unpaid tax, and the penalty is charged for every month your taxes aren’t paid (up to a maximum penalty of 25%). If you ignore the IRS’s reminders and continue to not file your tax return, the IRS will file a return for you. But remember, this isn’t a convenient way to avoid the hassles of doing your own taxes. The IRS has no way of knowing about many of the deductions and credits you may be eligible to claim, so when they file a return for you, you’ll almost certainly end up owing more tax than if you file a return yourself.
If you are owed a refund, and you don’t file your taxes, you’ll miss out on receiving the refund. You have three years from the original tax filing deadline (April 15 most years, or October 15 if you filed for an extension) to file your tax return claiming the refund. After that, you’ll lose the refund.
In both scenarios, you’re better off filing your tax return as efficiently as possible. If you won’t be able to get your taxes filed by this year’s April deadline, filing for an extension will give you extra time to prepare your taxes without facing failure-to-file penalties. The failure-to-file penalty is greater than the failure-to-pay penalty, so even if you can’t afford to pay all of your taxes, you’re better off submitting a tax return and then working with the IRS to settle your unpaid taxes than not filing a return at all.
Have questions? Taxation Solutions, Inc. can help. Call now to resolve your tax problems!