Unfiled Tax

Consequences of Unfiled Tax Return

When you know you owe taxes and neglect to file your tax return it is considered to be a lot worse than filling out a tax return and not having the ability to provide payment on the amount of tax owed. If you file your tax return but are unable of paying, the IRS does have a variety of solutions to assist you in paying your owed tax amount. However, if you do not file, it is deemed a crime that does come with punishment. Even if you have no finances to speak of, you still are obligated to send in your tax return.

The punishments associated with not filing include a minimum $25,000 fine, and one year in prison for every year you did not file taxes. The IRS usually does not have jail terms for unfiled returns. But, this is only because if the IRS tried to jail every individual with an unfiled return, only one percent of that total group would be able to go to jail. A scare tactic the IRS does use is that, sometimes, they will send an individual to jail in an effort to demonstrate to individuals what can occur if they do not file their returns. Just ask actor Wesley Snipes. 

What are the consequences associated with not filing tax returns?


The IRS will enforce a “failure to file” penalty. A delay in payment will result in penalty and interest charges. In general, if you choose to wait for a long period of time on filing your return, there will be more penalties charged than what you already owe. If you choose to continue delaying payment of back taxes, your total IRS bill can increase up to twenty-five percent.

Loss of refund

If you choose not file your tax return, it is very plausible that the IRS will confiscate your tax return. No one wants their tax refund taken by the IRS. You are not able to collect your refund if you decide not to take action and file your return. You generally have up to three years to file your return and receive your refund. After the three years are over, the IRS has no obligation to pay you

The Statute of limitation

Once the refund statute expiration date has passed, the IRS does not hold any responsibility in providing you with your refund anymore. The statute of limitations also does not begin until you file your return.

EITC - Earned Income Tax Credit

Do you know if you are eligible for Earned Income Tax Credit? If you are, to claim the credit, you need to file your tax return even though you are not necessitated to do so. However, you need to file to receive credit.

Can the IRS locate you?

It used to be that individuals could skip filing and actually get away with it. Although the IRS still does have some inefficiency, they continue updating their current computer systems to elevate the level of efficiency available to increase their capability to collect money. The computer systems are updated enough that individuals cannot just hope that they fall through the cracks and the IRS does not find them.

The current inefficiency displayed by the IRS is in relation to their slow ability to respond to individuals who do not file. Many of these individuals who did not file believe they were able to get away with it because the IRS has not contacted them within the last year or so. However, this is standard procedure for the IRS as there is usually a one to two-year lag before initial contact is made about unfiled taxes. And keep in mind that over these last few years, penalties and interest have been building, so you will owe much more than the original amount.

The information system utilized by the IRS is known as the Information Returns Program, or IRP. The job of the IRP is to match 1099 income reports and W-2 wage statements from the payer. This information is then matched against filed tax returns. When the IRP is unable to locate a return that matches this report, the computer automatically begins a program known as Taxpayer Delinquency Investigation. The computer then generates notices that will be sent to the current listed address about non-filing. If no reply is provided, an IRS official will attempt to make contact.

What happens when the IRS does locate you?

There are many ways the IRS will try to contact you. Depending on the way they choose to get in contact with you will display the seriousness of your case. You will either be considered either a non-criminal or criminal non-filer.
The IRS will often choose to provide contact through a telephone call or mailed letter, requesting you file your returns within the next thirty days from the date of the request, if you are not being held criminally responsible for not filing. An IRS agent might come to personally visit you and request a direct filing with them as soon as possible. If the IRS chooses to, they are legally allowed to file your returns on your behalf. However, this can be scary as they will not provide you with any benefits on any deductions.

If a criminal investigator comes knocking on your door, it means the IRS commenced a criminal investigation because of your unfiled taxes. However, this is not very common and will only occur if hundreds of thousand dollars in income are left unreported over the last few years.

After you are forced to file (or the IRS does the filing for you instead) you could possibly be levied or face monetary or property seizure, for example, wage levy, bank levy, and personal property levy.

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