If it has been years since you filed a tax return, you should file your past returns as soon as you can. If you are caught not filing taxes, you will have to face penalties.
Typically, the penalty for not filing taxes is usually 5% of the amount of tax you owe for the time that your return is late. The highest penalty for failure to file is 25%. In case you file your return over 60 days late, you will be charged a minimum penalty of $435 for not filing taxes or the tax amount you owe, whichever sum is smaller.
Penalty For Not Filing Taxes
You may not have to pay the penalty if you have a reasonable explanation for missing the filing deadline. Just attach a statement that explains your reason for filing late, to your return when you file it. Use Beem to file your federal and state taxes to get the maximum refund at the best price.
Keep in mind that the late filing penalty is not the same thing as the late payment fee. The late filing penalty penalizes people who don’t file in their Form 1040 and other required tax documents on time. Whereas, the late payment fee penalizes those who pay their taxes late. This fee is 0.5% of your unpaid taxes for every month your taxes remain unpaid. This also accrues additional interest.
Another thing to remember is that if the IRS already owes you money and you haven’t filed a tax return to claim it, you should get right on it! The IRS only gives you three years to claim a tax refund.
How to avoid this penalty
If you know you’re going to miss the tax filing deadline, you should give yourself the advantage by asking for an extension. A tax extension can buy you an additional six months to file your tax return with the IRS.
Keep in mind that a tax extension only buys you additional time to file your tax return. This does not mean that you get extra time to pay your taxes. Certain exceptions, such as victims of a natural disaster, certain military personnel, or Americans living overseas, may automatically be given extra time.
There’s no point in trying to see how long you can last without having to file a tax return. It’s a risky choice. While the government can only charge you with criminal tax evasion for six years, it can collect the taxes you owe and assess penalties forever.
Also Read: How to Apply for Tax Extension Online in 2023
Other consequences
On top of the penalty, the following could happen in cases of tax evasion:
- If you fail to pay the taxes that you owe by the prescribed deadline, the IRS can charge you 0.5% of the unpaid amount every month, up to 25%.
- Additional interest will accrue on your unpaid taxes with the failure-to-pay penalty.
- If you do not file your taxes but the IRS has the information it needs to tally your taxes, such as your W-2 form, you may be informed by mail that a return has been filed on your behalf. Keep in mind that the IRS won’t consider any of your deductions, tax credits, or other tax advantages you may have put down if you did your taxes yourself.
- If you haven’t been paying attention, you may not be getting the money that you’re owed. Typically, the IRS gives you three years to file returns for previous years. Once this deadline passes, you are not eligible to get any tax refund for that year.
Check out: Whether you can get Financial Aid without Filing Taxes
