3 Legal Consequences of Failing to File Tax Returns

Person's hand sticking out of a pile of tax forms, word help on the background, EPS 8 vector illustration

When you owe taxes and neglect to file tax returns, you invite many IRS tax problems. Many taxpayers are unaware of the fact that unfiled tax returns are worse than those filed but not paid up. If you have financial issues due to which you are unable to pay your taxes, the IRS has avenues to help you pay off your dues. You must bear in mind that not filing your tax returns is a crime for which you could be punished by the IRS. Continuing on the subject, this blog post covers an overview of the four major penalties for failing to file tax returns. Take a look.

1. Penalties and Interest

For unfiled tax returns in Dallas or anywhere in the U.S., the IRS levies charges on your tax account in the form of interest and penalties. The penalties are imposed for two major reasons which are:

Failure-to-file – If a taxpayer has non-filed tax returns, a late penalty fee of 5 percent of the total due is imposed by the IRS. The penalty grows for every month up to 25 percent.

Failure-to-pay – If a taxpayer filed their tax returns on time but failed to pay outstanding debts, the IRS imposes a penalty of 0.5 percent on the total amount they owe.

Apart from imposing penalties, the IRS also charges interest on unpaid taxes which is between 3 to 10 percent on a quarterly basis.

2. Loss of Refund and Tax Benefits

The IRS gives taxpayers a period of three years to claim refunds on filed returns. If you don’t file the tax return in time, you can consider the refund amount lost, and you can’t claim the credit in later tax years. It is also important to know that there is a time limit to claim a tax credit. Self-employed individuals do not get any social security retirement or disability benefit if they fail to file their returns.

3. Face Collection Actions

When a taxpayer fails to fully pay the debt in time, the IRS may perform a return assessment, which may result in collection actions. The type of enforcement depends on the circumstances behind the unfiled tax returns and the amount you owe the IRS. They may seize your assets, including bank accounts, vehicle, home, or other personal property, place a lien against your property, or file a criminal case. When the IRS seizes your assets, child support payments, SSI, and disability benefits are exempt from such seizure.

Last Few Words

IRS expects every taxpayer to file their returns and pay their taxes by the 15th of April every year. Failure or negligence to file a return can cause financial distress and may lead to legal consequences. If you are facing IRS tax problems in Dallas such as a delinquent tax return, speak with Nick Nemeth at the Law Office of Nick Nemeth, PLLC. We are a reputable Dallas-Fort Worth based firm providing expert solutions to complex IRS tax related problems. To schedule your free, no obligation, consultation with Nick Nemeth, call at (972) 484-0829.  If you have any questions or concerns, you can fill out the contact form and our team will get in touch with you shortly.


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