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The 7 Worst Results of Not Filing Tax Returns

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1) You Will Go to Jail

• Not filing federal tax returns is consider as a tax fraud.

• Unfiled tax return can result in a one-year jail sentence and a $25,000 fine.

• The IRS could send a taxpayer to jail for up to 5 years for a single tax felony offense.

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2) Incur a 25% Penalty

• Harshest yet common IRS penalties is the failure-to-file penalty.

• The failure-to-file penalty begins the day after April 16th or October 15th.

• The penalty is 5% a month for a maximum of 5 months.

• The ceiling is 25% of the tax debt.

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3) Incur Added Penalties

• IRS has 140 penalties to use against taxpayers.

• Failure-to pay-penalty of 5% a month and combines it with the failure-to file-penalty to reach a 25% ceiling.

• IRS charges interest on the combined amount of back taxes owed and penalties.

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4) Increase Taxes Due

• IRS may file a “Substitute for Return” if a taxpayer does not file tax return in time.

• IRS filed tax returns always favor the government and never favor the taxpayer.

• The taxpayer receives one standard deduction and one personal exemption.

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• The “Substitute for Return” does not include added standard deductions, personal exemptions.

• Other deductions and tax credits that may be due a taxpayer.

• The taxpayer to have a larger tax liability and greater interest on the tax due plus penalties.

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5) Delay Tax Relief

• IRS will not resolve a tax problem until taxpayer files all delinquent tax returns.

• Filing unfiled tax returns quickly reduces the penalties and interest the taxpayer will owe.

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6) Lose Tax Refund Forever

• Never too late to file a tax return.

• To claim a refund, the taxpayer has only 3 years from the original due date of the tax return to file.

• Once past this 3 year deadline, the taxpayer can only use the refund toward back taxes owed.

• The taxpayer cannot receive the refund.

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7) The 10 Year IRS Collection Statute

• IRS has 10 years from the date it finalizes the tax liability to collect the taxes owed.

• The 10 year collection clock begins ticking on the date of tax return filing.

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• Delayed tax return filings only delay the start date of the 10 year period.

• IRS calls the last day of this 10 year period the “Collection Statute Expiration Date”.

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