More than 200 million Americans file their federal income tax returns with the Internal Revenue Service (IRS) each year. But what if you are not among that number? What will the IRS do if you do not pay your tax liability, or for that matter, if you do not even file your tax return?
The Federal Government of the United States relies on the money paid through income taxes to function, as income taxes paid to the IRS account for funding approximately half of the annual budget of the United States. Because of the heavy reliance the government places on receiving income taxes, the IRS takes the nonpayment of taxes very seriously.
The IRS starts addressing the nonpayment of tax by assessing a penalty and interest against the tax liability owed. This is especially true for those who do not file their federal income taxes. When you do not file your federal income tax, the IRS begins to assess against you a failure to file (FTF) penalty. The FTF penalty is assessed at the rate of 5% of the amount you owe per month. For example, after the filing of your tax return is one month late, you will now owe your original tax liability plus an additional 5% of that amount; at the end of the second month, you will owe the original tax liability plus an additional 10%; and so on until the filing of your tax return is five months late at which time you will owe the original tax amount plus 25%.
If you file your federal income tax return but do not pay the tax you owe, the IRS begins to assess a failure to pay (FTP) penalty. The FTP penalty is only .5% of the amount you owe per month, a much lower penalty.
Therefore, if you owe $1,000 in tax and choose not to file your return, five months later you will owe $1,250 plus interest; but if you file the return and do not pay your tax, five months later you will only owe $1,025 plus interest.
In addition to assessing penalties and interest against you, the IRS will begin to pursue you to collect the unpaid tax liability. This process will begin with letters and other methods of contacting you to be sure you are aware that you have an unpaid tax liability. But as time passes and the IRS continues to receive no payment or contact from you being willing to work out some form of payment arrangement, the IRS will escalate the matter, ultimately possibly filing criminal charges against you or obtaining a lien so they can begin to seize your personal property to satisfy the tax liability.
How can I get help with my unpaid federal income taxes or tax returns I have not even filed?
If you need help with a matter related to your federal income taxes, you need to speak with a tax attorney. A tax attorney is an attorney who has attended law school specifically to learn about addressing tax matters. Along with this training, such an attorney will have a great deal of experience in dealing with situations similar to yours.
Please complete the short form below, and a tax attorney can review your situation and get in touch with you to speak about the matter. This initial consultation is free of charge, completely confidential, and does not obligate you to anything further. Therefore, you have every reason to take advantage of this opportunity by submitting the form to get help with your tax matter today.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.