No one likes to carry any kind of debt on them, especially when it is the debt of unfiled taxes for which you might have to pay huge penalties and even go to jail. So, it is never too late to correct your mistakes and speedily file returns. You might need the help of a tax lawyer to avoid penalties and things from going wrong. Messing with the IRS is not right. You might get yourself into big trouble which will haunt you day and night.
Here are a few points that will help you know what would have happened with you if you don’t pay your taxes on time or think of going against the IRS and its taxation rules.
- You Will Be Fined Heavily: If you don’t pay your tax on time, the first thing that the IRS will do is – it will include penalties. It will begin with the late payment penalty which will become more and more as the amount of time passes. The IRS can charge you as small as 5% and as high as 25% of your tax bill as a tax penalty.
- Your Tax Debt Will Accrued Interest: If you will not pay the taxes you owe, it will not only increase the penalty amount on your tax debt but will also continue generating interest amount. The IRS will send you to notice each month regarding your unfiled taxes and they will also mention the amount of interest that has been accrued on your taxes.
- High Chances of Tax Evasion Investigations: if you fail to pay your taxes, then there are high chances that you might have to face tax evasion charges for your unfiled taxes. You need to understand the seriousness of this situation as this gets into the criminal side of the law. It could lead you to jail and you have to pay fine generally higher than $100,000. The investigations will be time-consuming and last longer than expected as a result of which the amount you will need to pay to the tax lawyer to defend yourself as a legal fee will also be an added expenditure.
- The IRS Might File Your Return If You Fail To Do So: This is another unwanted circumstance in which the IRS can file your return. They will simply consider the amount that others have reported that they have paid you and will file your taxes without considering deductions or other situations into account. This will be the worst situation you can expect as you will end up paying more than the amount you rightfully owe.
- The Government Can Hold Back Your Refund Checks (If Any): If you are expecting any refund, then forget about it as the Government can hold all your checks. You might have made so many plans with the refund amount like buying something you have always wanted or started a new business or much more. But sadly, these will be put on hold. Apart from this, the government can take your passport so that you cannot go to some other country.
- Your Credit Can Be Hurt Due To Your Tax Debts: If your tax debt reaches a certain level, it will start affecting your credit. More precisely, you can see a hold applied on your record that can be considered as a very big red flag on your credit report. It will make it hard for you to get loans or credit cards moving forward. It can also take years to pull through from this type of setback. You are allowed to sign up for a payment plan. So, it is advisable to think about options before letting your credit take a hit. Though hiring a tax attorney can prove beneficial here as they can help you negotiate an offer in compromise that will abate your tax debt and help you get back on your feet. An experienced tax attorney can also help you take benefit from the fresh start program. This program has been specifically made for the people who have been tax defaulters, giving them more time and breathing room to deal with their tax debt.
- Whole Debt Can’t Be Wiped Out With Bankruptcy: Getting tax mercy by means of bankruptcy is not so clear and defined as your complete debt cannot be discharged. Bankruptcy is generally an option when a person has a huge amount as a debt which he cannot pay in any condition.
- You May Still Have To Repay Your Local and State Governments: In addition to the IRS taxes that you owe, under no circumstances, you should not forget about the obligations that you still have to your state and local governments. Your local & state tax bills will keep coming as here, you are dealing with a completely different department of taxation that has different protocols when compared to the Federal government. This will further make things difficult, as the interest will keep building on taxes that you owe in general.
In all the above-mentioned situations, only a tax lawyer can help you by guiding you well on this and taking care of all the processes. They will make sure that you will have to pay fewer penalties.