Advertisement

What to Do If You Haven't Filed Your Taxes in Years

What to Do If You Haven't Filed Your Taxes in Years
From Lifehacker - September 15, 2017

If the IRS owes you money, theres no penalty for filing your taxes late. If you owe them money, things can get very ugly very fast. If you havent filed your taxes in years, heres what you need to know.

Theres a difference between failing to file your taxes and failing to pay them. According to the IRS, a surprising number of people dont bother filing their taxes and claiming their refunds every year. Last year, the IRS announced $950 million was waiting for about one million taxpayers who didnt file in 2012. Theres no penalty for filing a late return if youre due a refund, but you only have a three-year window to claim it. So if you havent done your taxes since 2013 and youre fairly certain you dont owe money, you might be leaving money on the table. CNN puts it this way:

This has always been the case, but many people dont realize it. The IRS is chomping at the bit to get its tax revenue. Its less concerned about doling out refunds to people who havent claimed them yet. So if you are absolutely sure youre owed a refund, you wont get in trouble if you miss the filing deadline.

But lets say you you dont file and you do owe money. Or maybe you do file but you still dont pay what you owe. Either way, if you dont pay the IRS what you owe, you could be in trouble whether youve filed or not.

What Happens If You Dont Pay Your Taxes

Technically, not paying your past due taxes is considered a misdemeanor. Lawyers.com explains that this means you can be fined up to $25,000 for each tax year youre delinquent. You could even be sent to prison for (a maximum of) a year! This is unlikely, as the IRS would rather collect their money than send you to the pokey. If you know you owe them money, you might be surprised at their willingness to work with you if you come forward. As CPA Jeff Haywood told Yahoo Finance about clients who hadnt paid their taxes:

In most cases when I have prepared years of returns for them they either have not owed at all or what they did owe was much less than they expected. Usually some sort of fear has kept them from filing...Because of the economic climate going back to 2008, the IRS has become more understanding with these arrangements.

There are penalties, however. The IRS charges 5% per month on what you owe, up to a maximum of 25% after five months. You also have to pay 3% interest along with a failure-to-pay penalty thats 0.5% of your unpaid taxes for each month you dont pay those taxes. The IRS has a full description of their late filing fees and penalties here.

Once you miss your payment, the IRS will send you a letter. If you dont take action, eventually, things can get ugly. They can freeze your bank accounts, garnish your wages, and even put a lien on your house. While the government has up to six years to criminally charge you with failing to file, theres no time limit on how long the IRS can go after you for not filing and paying your taxes.

How to Fix It

There are some circumstances in which the IRS might waive your penalties (but youll still have to pay what you owe). You need to prove reasonable cause, and according to the IRS website:

Advertisement

Continue reading at Lifehacker »