Tax Day in the U.S. was April 17th. Unless you filed an extension, you should have filed your taxes by now. But, the fact is, some people just don’t file or pay their taxes for any number of reasons. If you are among that group, the looming question jumping around in your head right about now is: what is going to happen to me.
What exactly happens if you don’t pay your taxes?
First and foremost, there is a big difference between not filing your taxes and not paying them.
- People who just don’t file their taxes could face a failure-to-file penalty. What does that entail? You’ll be on the hook for 5% of your unpaid taxes for each month your tax return is late, up to 25%. For those who end up filing 60 days late, you’ll end up paying a minimum of $135 or 100 percent of the taxes you owe (whichever is less).
- If you file your taxes but just don’t pay them, you’ll face a failure-to-pay penalty; generally .5% of your unpaid taxes for each month you don’t pay and up to 25%. It gets worse: You’ll also start accruing interest on those unpaid taxes, the interest rate being the federal short-term rate, plus 3%.
- You might be missing out on a refund by not filing. After all, the IRS attests to having close to $1 billion in unclaimed funds every year, with refunds averaging about $700.
Beyond fines, the IRS can also do a host of other things you. For instance:
- They can file a notice of a federal tax lien (a claim to your property)
- Seize your property
- Make you forfeit your refund
- File charges against you for tax evasion
- Revoke your passport (good-bye vacation)
If you haven’t filed or paid your taxes, what should you do now?
Now that it is fully settling in how bad it is to avoid your taxes, the financial experts agree, if you don’t have the money to pay your taxes, it is still a good idea to file. The failure-to-file penalty is much larger than the failure-to-pay penalty. Plus, the IRS offers payments plans to help you get out of debt.
Bottom line: Ignore your tax situation, and it’s only going to get worse. If you are reading this article, though, you probably already knew that. The good news is, there are some pretty genius ways to up your potential refund amount, which you can read about here.
Find yourself in need of some extra cash to pay off your debts? Try these four ways to make $400 a month at home. Alternatively, you can cut down your monthly expenses if you stop wasting money on groceries.