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| © Karolina Grabowska / Pexels |
By Maryalene LaPonsie, Money Talks News
Pull out your shoebox of receipts and clear your calendar: Tax Day — April 15 — is almost here.
But what happens if you don’t file a tax return? Will the IRS even notice?
Um, yes. Even if you don’t file, your boss, mortgage company and bank are reporting to the IRS with forms that contain your name and Social Security number.
Once the IRS catches up, the consequences can range from mildly annoying to “your life will never be the same again.”
Following is a look at exactly what could happen if you fail to pay your taxes.
1
If you don’t pay your taxes, you generally will be assessed a financial penalty that gets worse the longer you wait to meet the obligation.
The exact amount you might owe depends on the nature of your error, and it can be a little complicated. To get the precise breakdown, check out IRS Topic 653.
2
If you have a refund coming but don’t get around to filing, your refund can disappear. For you to receive a refund, the IRS generally requires you to file the corresponding return within three years of its due date.
3
Once the IRS is done playing nice, the agency could start to do things that really make life difficult. For example, it might assess a federal tax lien on your property.
A tax lien is like the government claiming dibs on something of value you own. According to the IRS:
“If the lien is in place, you may find it difficult to sell or borrow against your property. The tax lien would also appear on your credit report ― which may harm your credit rating ― and your creditors would also be publicly notified that the IRS has priority to seize your property.”
4
It isn’t just your current assets the IRS can seize. It can institute a wage levy, taking part of your paycheck going forward. According to H&R Block:
“You’ll get to keep a certain amount of your paycheck. The IRS determines your exempt amount using your filing status, pay period and number of dependents. For example, if you’re single with no dependents and make $1,000 every two weeks, the IRS can take up to $538 of your check each pay period. IRS Publication 1484 explains how to figure out the exempt amount.”
5
It’s bad enough to be in debt; it’s worse when other people know. And a tax lien is a public record — meaning that not only can lenders find it, but potential landlords and employers can, too.
6
At some point after sending you notices, including an Information Document Request, the IRS may issue a summons to obtain information from you or compel your testimony to help with their investigation, according to Brager Tax Law Group, a law firm in the Los Angeles area.
If you get an IRS summons, get an excellent tax attorney to accompany you to the meeting and let that person do most of the talking.
7
Let’s take this to its logical end. You didn’t or couldn’t pay your taxes, so you were charged penalties and interest. The government swooped in and collected your assets. Then, they started garnishing your checks. Now, you don’t have enough left over each week to pay the bills. Where does this end for you? In bankruptcy court.
However, this might not be the end, as filing for bankruptcy protection does not remove most prior tax debts, says legal website Nolo. You have to meet a host of conditions to wipe out tax debt as part of a Chapter 7 bankruptcy.
8
What is the most awful thing that can happen if you don’t pay your taxes? You could go to jail.
Now, granted, you have to be really trying hard to get sentenced for tax evasion. The IRS doesn’t lock up folks who are simply having trouble paying their bill. But if you actively try to defraud the government, look out!
From Money Talks News
Pull out your shoebox of receipts and clear your calendar: Tax Day — April 15 — is almost here.
But what happens if you don’t file a tax return? Will the IRS even notice?
Um, yes. Even if you don’t file, your boss, mortgage company and bank are reporting to the IRS with forms that contain your name and Social Security number.
Once the IRS catches up, the consequences can range from mildly annoying to “your life will never be the same again.”
Following is a look at exactly what could happen if you fail to pay your taxes.
1
You could get hit with penalties
 |
| © fizkes / Shutterstock.com |
If you don’t pay your taxes, you generally will be assessed a financial penalty that gets worse the longer you wait to meet the obligation.
The exact amount you might owe depends on the nature of your error, and it can be a little complicated. To get the precise breakdown, check out IRS Topic 653.
2
You could forfeit your refund
 |
| © UNIKYLUCKK / Shutterstock.com |
If you have a refund coming but don’t get around to filing, your refund can disappear. For you to receive a refund, the IRS generally requires you to file the corresponding return within three years of its due date.
3
The government could put a tax lien on your property
 |
| © sirtravelalot / Shutterstock.com |
Once the IRS is done playing nice, the agency could start to do things that really make life difficult. For example, it might assess a federal tax lien on your property.
A tax lien is like the government claiming dibs on something of value you own. According to the IRS:
“If the lien is in place, you may find it difficult to sell or borrow against your property. The tax lien would also appear on your credit report ― which may harm your credit rating ― and your creditors would also be publicly notified that the IRS has priority to seize your property.”
4
The government can garnish your income
 |
| © Diego Cervo / Shutterstock.com |
It isn’t just your current assets the IRS can seize. It can institute a wage levy, taking part of your paycheck going forward. According to H&R Block:
“You’ll get to keep a certain amount of your paycheck. The IRS determines your exempt amount using your filing status, pay period and number of dependents. For example, if you’re single with no dependents and make $1,000 every two weeks, the IRS can take up to $538 of your check each pay period. IRS Publication 1484 explains how to figure out the exempt amount.”
5
Anyone can find out about your debt
 |
| © Roman Samborskyi / Shutterstock.com |
It’s bad enough to be in debt; it’s worse when other people know. And a tax lien is a public record — meaning that not only can lenders find it, but potential landlords and employers can, too.
6
The IRS will summon you
 |
| © Iakov Filimonov / Shutterstock.com |
At some point after sending you notices, including an Information Document Request, the IRS may issue a summons to obtain information from you or compel your testimony to help with their investigation, according to Brager Tax Law Group, a law firm in the Los Angeles area.
If you get an IRS summons, get an excellent tax attorney to accompany you to the meeting and let that person do most of the talking.
7
You might have to file for bankruptcy
 |
| © Dragana Gordic / Shutterstock.com |
Let’s take this to its logical end. You didn’t or couldn’t pay your taxes, so you were charged penalties and interest. The government swooped in and collected your assets. Then, they started garnishing your checks. Now, you don’t have enough left over each week to pay the bills. Where does this end for you? In bankruptcy court.
However, this might not be the end, as filing for bankruptcy protection does not remove most prior tax debts, says legal website Nolo. You have to meet a host of conditions to wipe out tax debt as part of a Chapter 7 bankruptcy.
8
You could go to jail
 |
| © Ollyy / Shutterstock.com |
What is the most awful thing that can happen if you don’t pay your taxes? You could go to jail.
Now, granted, you have to be really trying hard to get sentenced for tax evasion. The IRS doesn’t lock up folks who are simply having trouble paying their bill. But if you actively try to defraud the government, look out!
From Money Talks News
