12 Terrible Things Could Happen If You Don’t Do Your Taxes

Your best bet is to simply file...and here are the incentives

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12 Terrible Things Could Happen If You Don’t Do Your Taxes

Receive a summons. If the IRS is having trouble sorting out the taxes you owe, you could get a summons — that’s a legal requirement to appear — to meet with an IRS officer, and bring appropriate records, documents, and possibly even testify. It won’t necessarily be you who is asked to meet with the agency: a third party with information relevant to your case, such as a record keeper from a financial institution, could be summoned instead. If the IRS is simply gathering info, you’ll be informed of the third-party summons, but if it’s in reference to money it’s already clear you owe, you might not even find out.

Declare bankruptcy. Let’s hope it doesn’t come to this. “People who might declare bankruptcy are the people who couldn’t pay their taxes because they couldn’t afford to pay their mortgage or expenses and get caught in a bit of a bind,” explains Green. “Usually it’s people who are caught for three or four years not filing, spending the money they didn’t pay the IRS on things to try and stay above water.” Remember that bankruptcy isn’t magic: While in certain cases, a tax debt can be discharged, if it has turned into a tax lien, it might not be erased. “Instead,” clarifies Green, “the IRS will generally suspend the debt and seek to collect it after bankruptcy.”

Serve jail time. While jail is unusual for most well-meaning citizens, it is a possibility. “If the government deems that you’ve willfully failed to file or filed fraudulent returns, they could see it as an attempt to defraud the government,” says Green. “In cases where jail time becomes an issue, you typically see two things: a lot of income being hidden from the IRS, and a pattern or some evidence of wrongdoing.” Unless you’re a dishonest high roller, it’s unlikely that the IRS will pursue a jail sentence.

Deal with the IRS for a decade. Did we mention that the government has the right to pursue unpaid taxes for 10 years? While there are certain appeals and exceptions for individual cases, if you’ve been a negligent taxpayer (or rather, non-taxpayer) you can look forward to a long and close relationship with the IRS.

However, there’s hope.

The absolute best thing you can do if you’ve neglected to file or pay, says Green, is reach out to the IRS immediately. It may seem counterintuitive, but the agency is more likely to look kindly on someone who admits they’re off track and wants to work it out than someone who has been lining the litter box with their notices. You may be able to negotiate a payment plan or even a reduction of the total owed. “You shouldn’t panic upon getting a notice from the IRS,” says Green. “There is some recourse, but your options are more limited the longer you wait to engage.”

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Article printed from InvestorPlace Media, http://investorplace.com/2014/04/taxes-irs-irs-due-date-irs-penalties/.

©2014 InvestorPlace Media, LLC

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