What will happen if you do not file your taxes? Everything you need to know

While there are many taxpayers who are not required to file a tax return, the majority of people are required to file their taxes before the given deadline in their country. In case you do not do the same, then this results in serious monetary loss for you. So, if you are thinking about what happens if you don’t file taxes, then be prepared, as this article will make sure that you know about the consequences of not filing your tax returns at the correct time.

Why is it important to file your taxes?

Before we explain what happens if I don't file my taxes, you should know what happens when you do file your taxes, and why they are considered so important. Well, the first thing that you need to know is that not everyone is obliged to file a tax return; the process depends on your income, age, filing status, and numerous other factors. However, even then, filing these taxes allows you to claim certain tax refunds on the taxes that you have paid, and you need to keep in mind that the IRS will not automatically refund you unless you have filed a return. 

Exploring the consequences of not filing a tax return 

Now, answering the main question: what happens if you don’t file your taxes? As mentioned, there are a few consequences that will affect you negatively in this situation. We have explained all of them here. 

  1. Failure-to-File Penalties

If you’re supposed to file your taxes and skip it, the IRS hits you with a failure-to-file penalty. Usually, that’s 5% of what you owe for every month or part of a month your return’s late, and it can stack up to 25%. Wait more than 60 days past the deadline? You’ll get a minimum penalty, either a fixed dollar amount or 100% of what you owe, whichever’s less.

  1. Failure-to-pay Penalties 

In case you have filed a tax return, but have not paid the amount you need to pay by the deadline, the IRS has a different penalty for you, which is generally 0.5% every month on the amount you have not paid. If you have both penalties in a month, the IRS, in certain cases, may reduce the amount; however, you will still be required to pay a combined 5% per month for the initial months. 

  1. Interest Charges

Penalties aren’t the only thing piling up. The IRS also charges interest on any unpaid taxes, starting from the original due date until you pay everything off. That interest doesn’t just apply to the tax; you’ll pay it on any penalties, too. Over time, those extra costs really add up.

So, if you are thinking what happens if I don’t file taxes, then this is your answer. Not submitting your taxes could set off ever-increasing penalties and interest, and perhaps severe IRS collection activities. Filing a late return and contacting the IRS is always preferable to neglecting your tax obligations, even if you cannot pay in full.

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