Consequences of Not Filing an Income Tax Return
The Internal Revenue Service (IRS) often imposes stiff penalties for unfiled returns. Many taxpayers don't realize that the IRS has ways of learning about income and other financial information when taxpayers fail to file. Most often, a federal income tax return won't be filed if a taxpayer cannot afford to pay the liability. Since the IRS has solutions for those who are able and unable to pay, serious consequences may result if you fail to file.
If you owe income tax you may end up paying additional penalty fees and interest. Even if you are unable to pay what is owed, the IRS has several options and is willing to work with you to resolve tax debt . In some cases, IRS wage garnishment may be enforced but many claim the IRS rather work with you to determine a solution verses garnishing wages.
If you purposely fail to file and owe quite a bit in taxes, it may be seen as tax evasion in which the IRS imposes hefty fines and even prison time.
While going to jail is often rare, it is possible. Most common consequences for unfiled or back income taxes include:
- Failure to file penalty that may accrue interest fees. The longer you wait to file, the more you will owe.
- Losing a tax refund you were eligible for. If you are due to obtain a refund, you may not be penalized for filing late but you have three years to submit a completed return that shows you are entitled to receive it.
- Statute of limitations is affected. You have 3 years to claim a refund and after that, the IRS isn't obligated to issue one. Collection of back taxes start when a return is filed.
Questions or concerns can be discussed with a tax attorney or tax expert.