Thinking about not filing a tax return? Think again unless you want to pay even more thanks to tax penalties
You’ve probably seen the commercial where the tax preparer mentions a client who hadn’t filed returns for eight years. It happens.
There are lots of excuses reasons for not filing taxes.
There also is a big reason for taking care of your delinquent tax duties: Penalties.
So what is the deal with non-filing and nonpayment penalties?
As the two tax pros point out, the Internal Revenue Service can whack you separately for not filing a return and for not paying what you earn.
And folks who acknowledge their filing responsibility are more likely to try to pay at least part of their tax bills than those who ignore not only the tax debt but also the filing process.
When you don’t file, the IRS assesses a 5 percent penalty, which is calculated on the amount of tax due, for each month your return is late. This can add up after five months to the maximum penalty of 25 percent.
The failure-to-pay penalty also is based on the amount of tax you owe. The IRS charges 0.5 percent for each month your tax is not paid in full, and there is no maximum for not paying your tax bill.
Combined penalty calculations: In situations where you don’t file a return and don’t pay you tax liability, the IRS assesses a 4.5 percent, instead of the usually 5 percent, for not filing along with a 0.5 percent for not paying.
More drastic penalties: If you’re egregiously delinquent, you can expect the IRS to file a tax lien against you.
No filing, no refund.