Haven’t submitted your income tax return and are questioning 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 most of these cases the specific tax payers do not owe anything and do not have to file. This all depends upon your income, your filing status and your age.
There are two classifications for tax payers.
If you are a company owner or self employed and have actually made over $400 in the tax year or in the past, you have to submit an income tax return.
If you are a W-2 worker and have taxes gotten during the year it is a different story. There are minimum income limits and these change nearly every year. You are going to need to seek 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 annual 1040 guidelines that are supplied by the IRS.
State Taxes are a bit various and you will need to discover your State’s regional earnings tax page for the revenue requirements for your state.
The problem comes for taxpayers that by not filing a Federal and State tax return, you are then going to undergo more collection actions by the IRS. My recommendations is this. Even if you can not afford to pay your tax financial obligation costs you should file your returns to stay in compliance with the IRS. Pay what you can. Even if you do not owe anything in taxes for that year their can be dreadful repercussions for not filing. Some of those effects are:
Penalties – By not submitting a Federal Tax return by the date (April 15th or the extension date normally October 15th) you are going to face failure to submit penalty of 5% a month on the quantity of taxes your owe. This penalty can not go beyond 25% of the balance of taxes owed. This 5% charge each month can be minimized by the failure to pay charge when both penalties take place in the exact same month. If your tax return is filed more than 60 days after the due date, the minimum charge is $135 or 100% of the unpaid tax.
No Refund For You – The IRS is never ever going to pay you a refund if you owe them loan. After 3 years of not filing your returns it is never going to happen.
Losses Carried Forward – If you don’t submit your returns the IRS is not going to know about any losses you might have sustained. Usually you can offset your earnings by approximately $3000 and this amount can be carried forward. NOT if you do not file. Gone
Replacement for Return – More frequently called a SFR. If you do not submit the IRS understands how much you made from your W-2’s and 1099 forms. and they submit these replacement for returns. These are NEVER in your favor since they do not provide you any reductions you might be qualified for. They figure that if you desired the deductions you would have submitted your returns. This is going to cause more loan owed to the IRS so instead of you being possibly owed a refund you now owe the IRS instead.
No Possibility of Bankruptcy – You can not file an insolvency in the courts if you have unfiled income tax return. All your returns will need to be applied for at least 2 years before you can file for a Chapter 7 and 4 years prior to filing a Chapter 13.
Incarceration – It is extremely unusual for you to go to prison for not submitting an income tax return, but it is a possibility. In fact under Federal law, you can put in prison as much as a year and be issued a $25k fine for each year you do not submit a tax return. In some cases, the IRS may look at a non-filing as an effort to avert taxes which will carry much stiffer fines and jail time. With regards to State taxes, each state is various but lots of states do release 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 attempts. These include Tax Liens, Tax Levy’s against your salaries called Wage Garnishment of levy’s against your checking account.