Every year, millions of Americans pay their taxes as the tax code requires. Some may wonder if the Internal Revenue Service (IRS) would notice if they didn’t file their taxes, but it’s not worth the risk. If you file your taxes on time or not at all, it could save you money, lead to legal action, or make it hard to acquire loans or government benefits. We’ll talk about what happens if you don’t file your taxes and how to avoid it.
The Consequences of Not Filing Taxes
The IRS finds out if you still need to file your taxes. They keep a close eye on who files their taxes and when, and if you’re late or don’t pay your taxes at all, you’ll probably have to pay fines. The IRS charges a penalty of 5% of your original tax bill for every month you are late, up to a maximum of five months. In other words, if you wait to file your taxes, the amount you owe the government could go up by 25%.
Related: How Much Do Small Businesses Pay in Taxes?
That’s not all, though. If you file your taxes more than 60 days after the deadline, you may have to pay a minimum penalty of 100% of the tax you didn’t pay or a fixed fine between $435 and 2020, whichever is less. This fine is on top of the fees you still need to pay. If the government can show that you did not file your taxes to avoid paying taxes, you could be charged with criminal tax fraud. Even though the IRS doesn’t usually go after this crime, if you don’t file, you can go to jail, especially if an audit shows other signs of fraud.
Not filing your taxes can lead to fines and legal trouble, but it can also make it hard or impossible to apply for things that need a copy of your most recent federal tax return. This includes federal school debt, housing, and some perks from the government. If you still need to file your taxes recently, you might have missed out on government COVID-19 relief funds.
How to Avoid the Consequences of Avoiding Your Taxes?
Fortunately, if you need more preparation to file on tax day, avoiding these penalties is simple. You can ask for a six-month delay, which gives you more time to file your tax return. If you work as a freelancer or for yourself, send the IRS the necessary quarterly expected payments. This may not be the most fun thing to do, but it can help you avoid a big tax bill at the end of the year and any fines or problems that come with filing late.
Related: How to Lower Your Taxable Income and Pay Less in Taxes
In the end, you should always pay your taxes. If you don’t file, you might have to pay fines, face court action, or have trouble getting loans or government benefits. You should file taxes on time to prevent these problems or ask for more time if needed. Make sure you pay any taxes owed to the IRS, and if you’re self-employed, make your necessary quarterly projected payments. You’ll save yourself the trouble and money of not filing your taxes.
We’re happy you found this article informative! Go back to our blog page to find more tips, tricks and guidance on bookkeeping, to ensure your business is financially sound and ready to grow to the next level.
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