What are Unfiled Taxes?
Filing tax returns each year is one of the most complicated financial commitments wage earners must make. Especially if you are a small-business owner or 1099 employee, the process can be exceptionally more complicated.
While some taxpayers look forward to tax season as a time that they get to receive a sizable tax return check, others are faced with large tax bills that put them at financial risk.
When a taxpayer knows that filing their taxes will result in a tax bill they cannot afford, it is a natural reaction to forgo filing their taxes out of fear. However, not filing one’s taxes is one of the worst things that a taxpayer can do if they owe back taxes.
What are the Consequences for Not Filing?
The consequences for not filing your tax returns can be costly. If you do not file your taxes or fail to file for an extension by April 15th, late penalties will start immediately the following day. Also, for every month you fail to pay, your taxes accrue a 5% penalty, capping at 25%.
If you have a tax bill after you file your taxes and are unable to pay by April 15th, late penalties will still be applied to your balance, but they won’t be as severe. A rate of 0.5% to 1% of your unpaid taxes will be charged on your principal amount for every month that goes unpaid.
Starting on April 16th, a late penalty of 5% is taxed on to your owed amount for every month you fail to file. The IRS will begin sending their CP515, CP516, CP518, and CP515B letters in sequence until you file.
If you are owed a refund to an unfiled tax year, it is possible to still receive a refund even if you file late. However, you only have three years from the return’s due date to claim it. If you wait longer than this, you forfeit your right to receive your refund.
Make sure to file your taxes as early as possible. Filing months before the deadline can give you time to pay off your taxes.
What To Do Next
Don’t wait until the last second; file your taxes on time to give your future self peace of mind. If you need assistance with any unfiled taxes, feel free to call us at 833-419-RISE (7473).
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