<!–Saxotech Paragraph Count: 9
–>
What are the consequences if, because I know I owe the IRS money that I don’t have, I don’t file a return?
A lot of folks don’t file a tax return because they know they owe money and don’t have the money to send with the return. (We see this fairly often when folks want to file bankruptcy — a person filing bankruptcy must produce his/her return for the prior year.)
Unpaid taxes carry interest whether you do or do not file a timely return.
If you file a return without paying what you owe, a late payment penalty of one half of 1 percent per month is assessed.
If you do not file a return on April 15 (or on the date of any approved extension), there is a late filing penalty of 5 percent per month (in addition to the late payment penalty.)
As the IRS explains:
“Generally, interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is determined quarterly and is the federal short-term rate plus 3 percent. Interest is compounded daily. If you file a return but don’t pay all amounts shown as due on time, you’ll generally have to pay a late payment penalty of one-half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid from the due date, until the tax is paid in full or the 25 percent maximum penalty is reached. The one-half of 1 percent rate increases to 1 percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy. For individuals who file by the return due date, the one-half of 1 percent rate decreases to one-quarter of 1 percent for any month in which an installment agreement is in effect.
“If you owe tax and don’t file on time, the total late-filing penalty is usually 5 percent of the tax owed for each month or part of a month that your return is late, up to five months. If your return is more than 60 days late, the minimum penalty for late filing is the lesser of $135 or 100 percent of the tax owed.”
Fear makes folks do a lot of things. Failing to file a return because you owe taxes you don’t have is a mistake. It is far better to file a return. Instead of being afraid of what the IRS might do, speak to the IRS about the problem when you file the return. The IRS does have collection options that private creditors do not have, but unlike a lot of debt collectors, IRS personnel are not abusive.
Article source: http://www.delmarvanow.com/article/20120917/BUSINESS/309170025/Even-you-don-t-money-file-tax-return?odyssey=nav%7Chead
