Four Ways that Unfiled Taxes Can Hurt You

Do you have unfiled taxes that are due to the IRS? While you may not think this is a big idea, nothing could be further from the actual truth. There are many ways that unfiled taxes can hurt you. If you think that you can continue to hide from these, you are wrong. Soon enough you will find that you are in hot water with the IRS – and that is not something that you want.
If you are marked as a non-filer by the IRS you are going to eventually realize just how bad this status can be. The IRS has a system that determines who has yet to file their return. While you may not hear from the IRS right away, at some point they are going to come across your account and realize that you should have filed. This is when you will begin to receive notices.
Here are four ways that unfiled taxes can hurt you:
1. Fines and possible criminal charges. Although criminal charges are rare, this does happen from time to time. The possibility of getting in trouble with the law should be enough to scare you into filing any unfiled returns. Along with this, a fine of $25k can be filed for the years that you did not file.
2. Penalties. If you owe any money to the IRS and fail to file a return, your tax debt will continue to grow. As the IRS continues to assess penalties you will find that you now owe more money than ever before. The longer you wait to deal with unfiled taxes the more money you are going to owe in penalties. The failure to file penalty will accrue at a rate of five percent per month, for up to five month.
3. The IRS has the right to file a return for you. This may sound like a good thing, that way you do not have to do the work yourself. Unfortunately, this always ends up working against the taxpayer. When the IRS files a substitute return they are not going to consider any credits or deductions that you may qualify for. In turn, you will end up owing the IRS more money.
4. You are not able to qualify for bankruptcy. No matter if you opt for chapter 7 or 13, if you have unfiled taxes you are unable to use bankruptcy as a way of potentially discharging your tax liability.
If you are unable to file your tax return by the April 15 deadline, you are able to request an extension which will give you until October 15. Just remember that this does not give you an extra six months to pay any money that is due. It just means that you have this time to get your return together. By getting an extension you may be able to avoid the failure to file penalty.
With so many repercussions of unfiled taxes, you should realize that filing on time is a very big deal.