Curious about what happens if you don’t pay your taxes? Read on to learn what the IRS can – and will – do to people who commit tax evasion.
President Donald Trump extended the tax deadline this past month. So when April 15 rolls around, you can rest easy for now.
However, some of us still won’t be quite ready to pay our taxes come July 15, when the hard deadline occurs.
Have you ever wondered, what happens if you don’t pay your taxes? Keep reading to learn about what steps the IRS takes when you don’t pay up and if you can do anything about it.
What Happens If You Don’t Pay Your Taxes?
Truly, nothing good results from not paying your taxes. Talk to individuals who have not paid because of philosophical reasons. Many of them have spent time in jail and have lost most of their worldly possessions.
You might wonder, then, what happens if you don’t file taxes? If you do not file, you can expect the same penalty for tax evasion. Either way, you’re not paying your taxes.
Even with the extension in place this year, you have to pay your taxes.
What if I Lie On My Taxes?
If you can’t pay your taxes, you’ll be tempted to lie about them. However, the IRS will receive every W-2 and 1099 that you’ve already received. They know if you’ve reported your income.
Let’s say that you’re trying to hide cash income. Even then, if the IRS looks at your financial activity, they’ll see that your expenses don’t match up with your income, and they’ll red flag you.
What Does an IRS Audit Look Like?
Once the IRS red flags you, they’ll audit you.
Nothing brings more fear into a person’s life than knowing the IRS will be auditing them. An IRS auditor visits your home and combs through all of your financial records.
The auditor is making sure you’ve actually paid on all of your income, so they’re looking carefully at every stitch of income you’ve made.
You have a 1-in-160 chance of being audited in your lifetime. However, making yourself a target increases your chances.
Audits take time and money. You may have to take time off work to sit with the auditor. You can, however, hire someone to represent you.
The IRS reviews all of your returns for the past six years when they audit your income. So just because you did things right this year, if you attempted to lie on your taxes five years ago, they’ll find you out, and you may end up paying thousands.
What If My Tax Return is wrong?
You might wonder, what if it’s not my fault. What if my tax return is just wrong?
Regardless, if the IRS finds any mistakes on your return, they can slap you with steep penalties and fines.
You might think you’re saving yourself money by lying on your tax bill, but that decision can hurt you later on.
Even worse, you’ll not just have to pay back your taxes, but pay what you owe plus interest.
When You Fail to File
You might be tempted to just not file your taxes.
How long do you have to pay your taxes? Longer than you may think. You have initially until July 15 this year, and if you apply for an extension, you have until October 15.
If you file your taxes more than 60 days after July 15, the IRS will penalize you for up to 100 percent of the taxes you should pay on your return or $135, whichever is smaller.
Legally, the IRS cannot waive interest. When you fail to pay, you’ll pay a penalty and interest.
The IRS Reaches Out
If you fail to pay, the IRS will contact you. They’re not as bad as you might think.
You might wonder, what happens if you can’t pay your taxes? If, for example, you’re in the middle of a medical emergency and completely forget to pay taxes or cannot pay taxes, the IRS will give you an opportunity to fix the problem.
If you forget to pay your taxes, reach out to the IRS before they reach out to you. The IRS could end up giving you more grace if you make the first move. You might even be able to negotiate a payment plan.
You Lose Money
When you fail to pay your taxes, you’ll forfeit your refund. You’ll receive no tax refund when you don’t file and pay your taxes on time.
You can even lose future refunds. For example, if you didn’t file for taxes in 2017, but then the IRS owes you a refund this year, they can withhold the refund because you didn’t pay in 2017.
The Federal Payment Level Program gives the IRS the power to attack your assets as well. They must notify you first, though. For example, they can seize your social security.
An IRS levy is a scary thing. But you can learn how to stop it by just doing little research.
You Can Lose Property
When the IRS establishes a lien on you, they’re making a claim on your property, including a house, vehicle, and even your wages.
If you fail to pay your tax bill, the IRS can put a lien on any one of those things mentioned.
You can make an agreement with the IRS to pay your federal taxes one installment at a time. Then they remove your tax lien.
A lien goes on your public record. This makes getting a credit card or establishing credit anywhere difficult as well.
You Can Go to Jail
In the end, you can lose your property, your money, and your freedom when you fail to pay your taxes. You’ll receive a summons to meet with the IRS officer. You’ll have to bring the necessary documents.
You can still declare bankruptcy, but if you can’t pay the IRS after bankruptcy, you could still end up in jail. The IRS will put a hold on the debt for that time and wait until the bankruptcy proceedings have concluded.
If you hide an exorbitant amount of money, the IRS can and will put you in jail. You can go to jail for as little as a few months and as long as 15 years.
Make a Deal
If hard times have fallen on you and you cannot pay your taxes, reach out to the IRS. They’ll find you if you just let the deadlines pass by you.
Now that you know what happens if you don’t pay your taxes, you can move on and decide what to do.
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