So you didn't file your tax return this year. Maybe you forgot, maybe you didn't have the money to pay your balance due, or maybe you thought you could beat the system. The IRS doesn't really care, need, or want an explanation as to "why" you didn't file. If you don't file, you're setting yourself up for a bigger problem down the road. Here's what happens when you don't file: penalties, interest and possibly jail.
The Failure to File penalty is 5% of your unpaid balance per month, up to 25%. You're also more than likely going to be hit with the Failure to Pay penalty, which is 1% of your unpaid balance each month and there is no ceiling on this penalty. The more time passes, the higher it gets. Then there is the interest, which is compounded daily and compounds on the penalties too. So it really doesn't matter to the IRS if it takes them a couple of years to figure out you didn't file, because you'll get socked with penalties and interest and interest on the penalties for the entire time. It's very easy for a small tax liability from a couple years ago to triple in that time. What about jail? Absolutely. The IRS can prosecute you for criminal failure to file and send you to jail. The statute of limitations for criminal failure to file is six years, so at the very minimum make sure you have your last seven years of returns filed even if you can't pay any balance due. The IRS has a policy not to prosecute anyone that voluntarily gets into compliance before they begin an investigation.
File those past due returns even if you can't pay the balance in full. This will help keep you out of jail. If you want to save some money and can afford monthly payments you'll cut your failure to pay penalty in half if you enter into an installment agreement and make your payments on time. If your debt is growing out of control seek a competent representative to handle your case before the IRS. There are several resolution options to your tax problem that can help you sleep better at night, including setting up a payment plan you can afford – even if you've tried yourself and the IRS turned you down – a skilled professional can accomplish for you what you couldn't for yourself. A competent and skilled tax representative will charge a reasonable fee for their services, it's important to expect that. When you owe the IRS $25,000 and you pay a professional $3000, and in turn your tax debt is reduced to $9500, you just saved 50% including the fee for his or her services. Be an adult, take responsibility for your situation, don't expect to wipe out your tax debt for pennies on the dollar. Set yourself a reasonable expectation and recognize that yes some can settle their debt for less, but not everyone.
If you have a tax problem due to non-filing give us a call tollfree at (888) 438-6474. We're used to handling non-filer tax cases as most of our clients are, in fact, non-filers. We generally help them get caught up to date with their filing obligations, then formulate a plan using various IRS Problem solutions to help them get back into the system, without breaking the bank.