Having unfiled taxes is not the type of debt you ever want to carry around. This can be daunting to bounce back from, and you may be subject to several penalties.
Getting up to speed on your returns is key, and you’ll also need some legal help to avoid penalties and stop the bleeding. Consider these points to know exactly what you’re up against.
1. You Will Get Fined
The Internal Revenue Service (IRS) will first and foremost include penalties if you fail to file your taxes on time. It starts with a late payment penalty, but the fines can become more significant the more amount of time that passes.
The IRS can charge you as little as 5 percent of your tax bill and as much as 25 percent.
2. Your Tax Debt Will Accrue Interest
The longer you go without paying your taxes, the more you will end up owing in the long run. This is the case because your taxes will keep generating interest the longer you take to pay them.
You will receive several notices from the IRS each month regarding your unfiled taxes, and they’ll show how much interest has accrued with each statement.
3. Tax Evasion Investigations are Possible
Aside from a simple failure to pay, it’s also possible that you can face tax evasion charges for your unfiled taxes.
This gets into the criminal side of the law, and you can face time behind bars and fines upwards of $100,000 — not to mention having a felony on your record. Because these investigations are thorough and time-consuming, you’ll also have to account for the amount of money you will need to pay in legal fees just to defend yourself.
4. The IRS Might File Your Return For You If You Fail to File
Another unwanted circumstance is that the IRS can process your unfiled taxes for you.
When this happens, they’ll simply take the amounts that others have reported paying you, and will file, without taking any deductions or other circumstances into account. This way, you will likely end up paying more than you should rightfully owe.
5. The Government Can Withhold Your Refund Check
There’s also a chance that the government can withhold your refund check if you are owed one.
For many people, this is a time of year when you can use this check to take care of debt, purchase something you’ve always wanted, or even start a business venture. People that have kids and other dependents, or those who purchase a home or a green-friendly car will definitely want to receive any refunds they’re owed.
Aside from your tax refund check, the government can even take your passport to keep you from traveling abroad. This can be a huge mess if you’ve had your heart set on a vacation, or if you travel a lot in your line of business.
6. Tax Debt Can Hurt Your Credit
Once your tax debt reaches a certain level, it can begin affecting your credit as well. More specifically, you can have a lien put on you record that is seen as a very big red flag on your credit report.
As such, it makes it difficult for you to get lending or credit cards moving forward, and it can take years to recover from this type of blow.
You are entitled to sign up for a payment plan, so consider exploring that option before letting your credit take a hit.
A tax attorney can help you to negotiate an offer in compromise that will minimize your tax debt and let you get back on your feet. They can also help you take advantage of the fresh start program, which gives you more time and breathing room to handle your tax debt.
7. Your Entire Debt Can’t Be Wiped Out With Bankruptcy
Getting tax forgiveness via bankruptcy isn’t so cut and dry since not all of it can be discharged.
Bankruptcy is usually an option when a person is up to their eyeballs in debt. But since it’s not as readily available to address tax debt, you may very feel as though you are running out of options.
8. You May Still Owe Your Local and State Governments
In addition to federal taxes that you owe, never forget about the obligations that you still have to your state and local governments.
These tax bills will keep coming as well, and you are dealing with an entirely different department of taxation, which has different protocols than the Federal government. This further complicates the issue, in addition to adding to the interest that will keep building on taxes that you owe overall.
Get Help With Your Unfiled Taxes
Having debt from unfiled taxes can be a huge burden. Thankfully, there are solutions in place.
In addition to getting up to speed on taxes, tax professionals can assist you with audits and any tax-related litigation. You can look no further than the Silver Tax Group when you need this type of service.
We can help you out with all types of tax issues, whether you want help filing an offer in compromise, or assistance fighting a tax case in court. We’re the tax attorneys that can help you, and would love to explain how with a free consultation.
Our team of tax attorneys is on call to answer your questions 24 hours a day and 7 days a week. Take some time out to contact us via the web, or give us a call at 1-855-491-2224.