Tax season is right around the corner.
If you don’t file and pay your taxes, the things that could happen to you may cause far more than a headache.
Julius Green, tax partner and leader of Baker Tilly‘s tax practice in the Philadelphia region, explained to Business Insider the potential consequences of letting the deadline come and go without filing.
Granted, you aren’t guaranteed to suffer these consequences, and everyone’s tax situation is different, but here are a dozen terrible things that could happen if you don’t do your taxes.
Pay a penalty fee
There are two kinds of “not doing” your taxes — failing to file and failing to pay. “If you fail to file, you get hit with a penalty of 5% of the tax owed, up to five months out, with a minimum penalty of $135, or as much as 100% of the tax owed — whichever is less,” Green says. If you don’t pay, he continues, you’re typically charged a penalty, plus you’ll have to …
“Statutorily, the IRS can’t waive interest,” explains Green. “They want the time value of the money you owe them.” If you fail to pay, you may be paying a penalty plus interest, which is usually determined by the federal short-term rate (anywhere from 1%-4%), plus 3%, for a total of 4%-6%.
Get notices from the IRS
It’s probably fair to assume that no one wants mail from the IRS. But if you don’t file or don’t pay, that’s exactly what could happen. “The IRS gives you multiple opportunities to get it right,” says Green. “They have to send you a notice before taking any action, and usually they need a response in 30-60 days. But many people in this situation know it’s coming, so they panic when they get their notice and shove it in a drawer to deal with when they have the money.”
But here’s the thing: Whether you have the money or not, if you don’t reach out to the IRS upon receiving a notice, they could start taking action. What kind of action? Well, they can make you …