Filing a tax return may feel like a drag, especially if you believe you owe the government money. Perhaps you paid too little on purpose because you needed the cash in your account. No matter the reason, you are not in a rush to prepare that return.
What happens if you decide to skip out on filing a tax return? Whether your reason is to hide from a looming tax bill or simply that you do not think you should have to file, you may find yourself with some serious problems should you not file. These are just three examples of what may happen if you fail to file an income tax return timely.
1. Fee assessments
The IRS is busy processing returns for months following the annual deadline, so just because you do not hear from them right away, it is not an indicator that you have managed to steer clear of trouble. The IRS will figure out at some point that you have not met the deadline. Once that occurs, they will start assessing penalties for failing to file. These penalties may end up costing you 25% of your total tax bill.
2. Wage garnishment
When you do not pay attention to the correspondence the IRS sends, the process of collecting your unfiled return and money owed starts to escalate. At some point, you may get a visit from a representative from the local IRS satellite office delivering bad news: The IRS is garnishing your wages. This is a court process by which a lienholder gets a court’s approval to take money directly from your paycheck to fulfill a financial obligation.
3. Account suspension
Collection efforts by the IRS do not stop at wage garnishment. The agency can file a judgment against you and freeze all accounts and assets held in your name. Even you hold those accounts with someone else, they are subject to freezing.
When dealing with tax penalties, understand that the IRS will pursue any remedies it has against you. Finding someone to help you deal with the issue is the first step to getting back on track.