The tax filing deadline comes up fast sometimes, especially for those who owe money to the IRS. Even with the extended deadlines in 2020 and 2021, many Americans have failed to file on time. If you find yourself in this situation, you are not alone, but you should know that the situation will only continue to get worse until you take decisive action.
The IRS will file your taxes for you
If you fail to file your taxes, the IRS will eventually file them for you in the form of a Substitute for Return (SFR). This is a bad outcome for at least two reasons. First of all, it means your tax problem has escalated to the point the IRS is taking a relatively drastic action against you. Secondly, their tax assessment is likely not the most advantageous one for you. They will base their assessment upon the information that is available to them, including W2s and 1099s you collected throughout the tax year. They will not go out of their way to identify deductions, credits and other favorable information that could lower your tax bill.
And collect what is due
Once the IRS has assessed your taxes, they can begin the process of collecting any back taxes you owe, in addition to interest and fines. The collection process has many stages. They will send you letters letting you know what you owe and giving you instructions for paying. If you fail to pay they will eventually take legal action against you, which may include wage garnishment, bank account levies, liens and other collection actions.
If you are owed a refund, you will not likely draw any lawsuits from tax collectors, but you run the risk of losing the payout you are owed.
The cost of doing nothing
The best way to handle a tax problem is by meeting it head-on. By consulting with an experienced tax law attorney early on in the process, you can avoid costly fines, penalties and interest. You can also avoid running afoul with the IRS, a situation no taxpayer covets.