Haven’t filed your income tax return 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, fail to submit their Federal and State tax returns. Now in most of these cases the private tax payers do not owe anything and do not need to submit. This depends upon your earnings, your filing status and your age.
There are 2 classifications for tax payers.
If you are a business owner or self employed and have actually made over $400 in the tax year or in the past, you need to file a tax return.
If you are a W-2 worker and have actually taxes secured throughout the year it is a different story. There are minimum earnings thresholds and these modification nearly every year. You are going to need to seek to see simply precisely what the minimum earnings filing requirements are for your age and exactly what your filing status is for that year. You can discover this details in the yearly 1040 guidelines that are provided by the IRS.
State Taxes are a bit different and you will need to discover your State’s regional earnings tax page for the profits requirements for your state.
The problem comes for taxpayers that by not submitting a Federal and State tax return, you are then going to be subject to additional collection actions by the IRS. My advice is this. Even if you can not pay for to pay your tax debt expense you need to submit your go back to remain in compliance with the IRS. Pay exactly what you can.
Penalties – 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 submit charge of 5% a month on the amount of taxes your owe. This penalty can not surpass 25% of the balance of taxes owed. This 5% penalty each month can be decreased by the failure to pay penalty when both charges happen in the 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 unsettled tax.
No Refund For You – The IRS is never ever going to pay you a refund if you owe them money. After 3 years of not submitting your returns it is not ever going to occur.
Losses Carried Forward – If you don’t submit your returns the IRS is not going to learn about any losses you might have incurred. Normally you can offset your earnings by approximately $3000 and this quantity can be carried forward. NOT if you do not submit. Gone
Substitute for Return – More commonly called a SFR. If you do not submit the IRS knows just how much you made from your W-2’s and 1099 forms. and they file these alternative to returns. These are NEVER in your favor since they do not provide you any deductions you might be qualified for. They figure that if you wanted the deductions you would have submitted your returns. This is going to cause more money owed to the IRS so instead of you being perhaps owed a refund you now owe the IRS rather.
No Possibility of Bankruptcy – You can not file a personal bankruptcy in the courts if you have unfiled tax returns. All of your returns will have to be declared at least 2 years before you can file for a Chapter 7 and 4 years prior to submitting a Chapter 13.
Incarceration – It is extremely rare for you to go to prison for not submitting a tax return, but it is a possibility. In fact under Federal law, you can put in prison up to a year and be provided a $25k fine for each year you do not file a tax return. In some cases, the IRS may take a look at a non-filing as an effort to evade taxes which will carry much stiffer fines and prison time. With regards to State taxes, each state is different however many states do issue fines.
Collection Efforts Could Be Begin – Once you fail to submit your tax returns and you are assessed a tax amount owed then the IRS can begin collection efforts. These include Tax Liens, Tax Levy’s versus your earnings called Wage Garnishment of levy’s versus your checking account.
