You’re not alone. Fifteen Million People each year that have generated income, fail to file their Federal and State tax returns. Now in most of these cases the individual tax payers don’t owe anything and do not have to submit. This depends on your income, your filing status and your age.
There are 2 classifications for tax payers.
If you are an entrepreneur or self employed and have actually made over $400 in the tax year or in the past, you have to submit an income tax return.
If you are a W-2 employee and have taxes gotten throughout the year it is a different story. There are minimum income limits and these modification practically every year. You are going to have to seek to see just exactly what the minimum income filing requirements are for your age and exactly what your filing status is for that year. You can discover this details in the yearly 1040 directions that are offered by the IRS.
State Taxes are a bit different and you will have to discover your State’s local earnings tax page for the earnings requirements for your state.
The problem comes for taxpayers that by not filing a Federal and State tax return, you are then going to be subject to further collection actions by the IRS. My recommendations is this. Even if you can not pay for to pay your tax debt expense you must submit your go back to stay in compliance with the IRS. Pay exactly what you can. Even if you do not owe anything in taxes for that year their can be awful consequences for not filing. Some of those effects are:
Penalties – By not filing a Federal Tax return by the date (April 15th or the extension date typically October 15th) you are going to deal with failure to submit penalty of 5% a month on the amount of taxes your owe. This charge can not exceed 25% of the balance of taxes owed. This 5% charge each month can be decreased by the failure to pay penalty when both penalties occur in the same month. If your income tax return is filed more than 60 days after the due date, the minimum penalty is $135 or 100% of the overdue tax.
No Refund For You – The IRS is never going to pay you a refund if you owe them cash. After 3 years of not filing your returns it is never ever going to occur.
Losses Carried Forward – If you don’t submit your returns the IRS is not going to understand about any losses you may have incurred. Generally you can offset your income by up to $3000 and this quantity can be carried forward. NOT if you do not submit. Gone
Substitute for Return – More frequently called a SFR. If you don’t file the IRS knows just how much you made from your W-2’s and 1099 types. and they file these alternative to returns. These are NEVER in your favor since they do not offer you any deductions you might be qualified for. They figure that if you wanted the deductions you would have submitted your returns. This is going to cause more money owed to the IRS so instead of you being perhaps owed a refund you now owe the IRS rather.
No Possibility of Bankruptcy – You can not submit an insolvency in the courts if you have unfiled tax returns. All your returns will need to be applied for at least 2 years prior to you can file for a Chapter 7 and 4 years before filing a Chapter 13.
Imprisonment – It is very unusual for you to go to prison for not submitting an income tax return, however it is a possibility. In fact under Federal law, you can put in prison approximately a year and be provided a $25k fine for each year you do not file an income tax return. Often, the IRS might take a look at a non-filing as an attempt to avert taxes which will carry much stiffer fines and jail time. With regards to State taxes, each state is different but numerous states do release fines.
Collection Efforts Could Be Begin – Once you cannot submit your tax returns and you are assessed a tax quantity owed then the IRS can start collection attempts. These consist of Tax Liens, Tax Levy’s against your wages called Wage Garnishment of levy’s versus your checking account.
