Delinquent Tax Returns

Not filing a tax return when you actually owe taxes is far worse than filing a tax return and not being able to pay the tax amount owed. If you file a tax return but cannot pay, the IRS has various tax solutions to help you pay the tax amount owed. If you do not file a tax return it is considered a crime and you can be punished for it. So even if you do not have a penny to your name, it is still a great idea to file the return. Not filing a tax return can result in fine up to a $25,000 and a 1 year prison sentence for each unfiled tax year. Typically, the IRS won't send people to jail for unfiled returns because if they actually sent every person to jail that had an unfiled return, they would only be able to fit about 1% of those people in the jails. When they do send people to jail it is mainly to set an example and to scare people into filing their returns.

Consequences of Not Filing a Tax Return

  1. Penalties. The IRS may impose a failure to file penalty. If you owe money, a delay may result in a penalty as well as interest charges. Generally speaking, the longer you wait to file your return the more money you are going to be charged in penalties. Believe it or not, your bill could increase by as much as 25 percent if you continue to delay.
  2. Loss of refund. There is nothing worse than losing your tax refund to the IRS, but this is a very real possibility if you do not file a final return. If you are due a refund you will not be penalized by the IRS if you do not file. That being said, you cannot receive a refund without filing a return. In most cases, you have three years to file a tax return and receive a refund. After that, the IRS is not entitled to pay you.
  3. Statutes of limitation. After the expiration of the refund statute the IRS is no longer obligated to send you a check. Also, it is important to note that the statute of limitations for the IRS to collect owed taxes does not start until a return is filed.
  4. EITC. Are you entitled to the Earned Income Tax Credit? If so, to claim your credit you must file a tax return even if you are not required to do so. To receive the credit, you are required to file your return within three years of the due date.

 

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