Paying taxes can be one of the more arduous responsibilities for those that earn income. While it might be tempting to not pay your taxes or you simply don’t have enough money to do so at the moment, there are some large legal and monetary ramifications for those that don’t pay their taxes on time. The following will provide in-depth details on what these consequences are.
You’ll Eventually Have to Pay More
Skipping one or two years of paying taxes because you just don’t feel like it is not something that will slip by the IRS. It’s important to note that this is different than situations where you file taxes and just aren’t able to pay all that you owe. Doing so will only serve to add to the amount that you eventually have to pay once you decide to pay your taxes again. While the standard deadline for filing taxes is April 15th, you can always choose to file Form 4868 as a means of asking for a 6 month extension on the due date for your taxes.
If this isn’t done, the penalties won’t involve anything like jail time, but you will be subjected to a large amount of fees the next time you do file. If you don’t file, you will eventually receive a letter from the IRS detailing the amount of taxes that you owe, complete with a penalty fee and an interest fee. Interest rate accrues over time and is set to the federal short-term rate, as well as an additional 3 percent in interest of what you owe.
Your Credit Score Could Be Affected
Once you have reached a certain amount of back taxes from not paying, generally around $10,000, a lien will be placed on the property you own, which is typically a house. A state tax lien could also be provided to you upon failing to pay state taxes. If this happens, the lien will appear on your credit report and will dramatically affect your credit score for the worse. While this doesn’t necessarily mean you won’t be able to get a loan, it does mean that the loan will likely have a high interest rate.
Your Monetary Livelihood Could Take a Big Hit
Though it’s difficult to go to jail unless the government deems that you are trying to defraud it, which doesn’t usually happen unless you’re rich, you will still face the possibility that your property will be seized or your wages garnished. Once you start to file again, any return you would have received will go straight to the IRS, while you will have to pay interest for any money you still owe. If you have to, try filing Form 9465 in order to settle on a monthly payment for the taxes you owe. This should only be done if you don’t have the ability to pay back the full amount of what you owe.
You’ll Waste Time Trying to Fix the Situation
Even if you’re quick to change your mind on paying your taxes and decide to do so, filing late will still bring with it a whole host of problems that typically requires a tax professional to properly fix. As such, this will invariably cost you time and money that could have been better used elsewhere.