What Happens if You Don’t File Taxes?

Every year Americans go to their tax professional or input their information in some software to do their taxes. You may be wondering if this is really necessary and what would happen if you didn’t. At the minimum, you can expect some sort of penalty that will accrue over time. That is why many choose to forgo the hassle and leave it to the professionals at The Accountancy Solutions, accountants in Birmingham, to avoid any missteps that may occur.

 

What are these penalties?

If you fail to file your taxes past the deadline in mid-April, you can expect a small penalty to start to accrue. For each month that your taxes are late, you will face a penalty of 5% of your unpaid taxes up to 25%. Past 60 days you will either pay $135 or your full taxes – whichever is less.

 

What happens if I file them but don’t pay?

A penalty from the IRS still accrues, just at a much lesser rate. IRS will charge you 0.5% of whatever is unpaid, plus interest, which amount to the federal short-term rate, plus another 3%. All in all, penalties accrued this way cannot exceed 5% per month and max out at 25%.

 

Is there a way to file an extension on my taxes?

Yes, actually, you can get an extra six months to file your previous year’s taxes. The difference is that you will only accumulate a tenth of the penalties that you would if you didn’t file an extension. This can be the difference of thousands of dollars.

 

How do you file an extension?

Like all things tax-related it can vary. Individuals will need to go with form 4868, with special rules applying to anyone outside of the United States or serving in a combat zone. A business will need to go with either form 7004 or 1138, depending on their net operating income.

 

Okay, let’s start from the beginning then – how do I file my taxes?

There are a few steps, with the first being collecting all of your tax documents. Most people will require a W-2 or 1099 form for the tax years for their income, along with any other documentation related to capital gains, property, schooling, and so forth.

 

Do I need any forms from previous years?

Yes, you will need to sync up previous years taxes with your current ones. You can request any missing tax documents from the last 10 years from the IRS. Keep in mind that the bureaucracy is slow-moving and it can take up to 45 days to process your request.

 

Do I need to keep anything in mind when filing my tax returns?

Tax law changes from year to year, so make sure that when you are filing them it is done with the current year’s laws in mind. Most software programs automatically update for this, but if you have to file the year before lasts taxes make sure the appropriate year is selected.

 

What are some good tax programs to use?

There are several tax programs out there and they can save you money when compared to hiring a professional to do it. TurboTax is considered one of the best, but other programs like H&R Block, TaxAct Premium, Credit Karma and more are all great choices.

 

Tell me a bit about TurboTax.

Pretty much the name in tax software. The reason for this is that it has an expanse of options, like letting you take pictures of your W-2s and 1099 forms, being able to lift tax-deductible expenses right from your bank account, along with expert chat support.

 

What about H&R Block?

Slightly cheaper but not less quality program is through H&R Block. Many of the same features that TurboTax has is available here with the only problem being that the support isn’t as good. That being said, if you already know what you need to file, this program is one of the best.

 

Talk to me about TaxAct Premium.

TaxAct is extremely inexpensive, at least when compared to the above programs. In addition, this program has a set price that doesn’t fluctuate the closer you get to filing time. While it has fewer features than some of its competitors, it is usually more than sufficient for most people.

 

Is Credit Karma worth it?

One of the newest programs on the tax filing market that has only steadily improved in the past few years. Completely free and capable of handling all major IRS forms, this makes this a great choice for those wanting to get the most of their return without any hidden fees.

 

Is there anything else I should know?

Not filing your taxes can accrue penalties over time that can cost you big if you let them go for too long. If you don’t think you can make the fees, go ahead and file an extension so you don’t get hit too hard. When you are ready, there are several programs out there that can help you.