What Happens If I Can’t Pay My Taxes?
We prepare a lot of federal and state tax returns in Winchester, VA and at times have clients that cannot pay the taxes due, and decide not to file the tax return at all. Bad idea! Even if you are unable to pay the tax you owe, it is important that you still file the taxes and file ON TIME.
One of the biggest penalties assessed by the IRS is the Failure to File penalty. If you fail to file you just potentially added an additional 25% to your tax bill. The penalty for failure to file is 5% of the tax due each month. This means the IRS adds a 5% penalty EACH MONTH that your tax return remains un-filed. The maximum penalty of 25% will accumulate in just 5 months.
We suggest you deal with the issue. Believe it or not, according to the Internal Revenue Code (IRC) 7203, you can be charged with a misdemeanor for willful failure to file a return. Now, the IRS rarely invokes this criminal statute, but it is in the law. Nevertheless, not-filing exacerbates the issue and shows bad faith and makes it much more difficult to negotiate a deal with the IRS.