What Happens if You Owe to the IRS and Don’t File?

By- Maliney Jeasie

What Do We Understand By the IRS?

The Internal Revenue Service or the IRS is the federal government's revenue service in The United States of America. The body is responsible and in charge of collecting taxes. Additionally, it can administer and implement the Internal Revenue Code. The latter serves as the primary essence of the statutory or legal tax law under the federal government.

The Internal Revenue Service operates as a section of the Department of Treasury. It is led and supervised by the Commissioner of Internal Revenue. The primary duties of the organization consist of delivering various tax assistance to needy taxpayers and organizing and managing benefit programs. On top of that, the IRS discovers and resolves any instances or cases of fraudulent or erroneous tax filings.

The Internal Revenue Service has remained responsible for collecting or gathering a significant part of the revenue necessary to fund and run the federal government. It has been so since its establishment.

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The IRS remains involved and invested in various jobs. They relate to tax payment and filing. For instance, the body publishes different and distinct tax forms. Taxpayers have to choose a single one from among them and utilize it to calculate, assess, and report their tax obligations as stated by federal law. In addition, the Internal Revenue Service issues several forms that aid in its unique internal operations. Such documents consist of Form 4228 and Form 3471. Both get used during the early or initial stages and processing of the income tax returns.

The administrative work of the Internal Revenue Service does not end there. It is also responsible for revenue collection. The organization pursues and punishes the tax cheaters according to their level of crime and appropriately. Other than that, the IRS announces and implements administrative rulings. They consist of the private letter and the revenue ones. Furthermore, it issues the Internal Revenue Bulletin that comprises the various pronouncements and statements made by the Internal Revenue Service.

Also Read: Important Income Tax-Saving Tips to Save Income Tax

The IRS publishes formal pronouncements known as Revenue Procedures. They tell the taxpayers the correct methods and ways to collect any prior or preceding tax error. Moreover, it issues the Internal Revenue Manual. It is the unique manual for the internal operations of the IRS. It describes and mentions the clerical procedures and systems for auditing and processing tax returns. All the information in the guidebook remains stated in excruciating specificity and detail.

One of the previous jobs of the Internal Revenue Service consisted of overseeing and managing the Homebuyer Credit and First Time Homebuyer Credit programs that the federal government introduced and established. This responsibility of the IRS spanned over the course and period of two years, from 2008 to 2010.

The programs allowed the citizens and taxpayers of the United States of America to acquire money. They could receive it via legal means and from the government. The amount gets provided for purchasing homes, irrespective of income tax filings.

What are the Consequences of Not Filing Taxes Even After Owing to the IRS?

Suppose an individual or an organization or a group of people owe tax to the Internal Revenue Service and do not file it within the given time. In such cases, they can face severe tax and legal penalties. It goes without saying because those people will violate the law if they do not file their taxes.

In most cases, if a taxpayer fails to file their taxes or does so late, the IRS files and prepares a substitute return.Photo by Markus Winkler, Unsplash

All taxpayers should always file their taxes with the IRS on time, even if they cannot pay back the entire amount. If they fail to do so, they can face various consequences.

For instance, a faulty taxpayer may need to pay an increased amount over the due tax. In such scenarios, the IRS assesses and computes the interests and penalties imposable on the individual before deciding on the additional sum they have to pay. In general cases, the interest rate stands at 0.5% of the total tax that the person owes each month or half of the month. The calculation starts from the precise time when the taxpayer did not pay the due tax. It continues until the amount gets paid completely or the maximum penalty of 25% gets attained.

The interest rate increments to 1% if the tax does not get paid even after ten days after the IRS releases the notice stating their intention of levying. In such cases, the late-filing penalty may also get imposed. It generally stands at 5% of the total tax owed per month or half of the month for which the return is overdue. It continues for a maximum of five months. If the return exceeds 60 days, the minimum penalty for the late filing comes up to be less than $135. It can also be 100% of the due amount.

Another consequence that a faulty taxpayer can face is that they would not receive disability benefits or credits toward Social Security retirement. It stands true if they are self-employed. If they fail to file their taxes, they cannot report and notify their income and earnings to the Social Security Administration.

In most cases, if a taxpayer fails to file their taxes or does so late, the IRS files and prepares a substitute return. However, one rule applies here. The substitute return would depend solely on the information from other places. The IRS acquires them. It implies that the substitute return that the organization would prepare would not include any exemptions that the taxpayer could otherwise have received. In addition, the individual would not get entitled to an overstatement of the initial tax liability.

The IRS starts its tax collection process as soon as it assesses the taxes that a taxpayer is liable to pay. Suppose an individual fails to file their taxes to the Internal Revenue Service. In such scenarios, a levy can get placed on their wages. It can also get applied to their bank accounts. In other instances, the property belonging to the taxpayer can face a federal tax lien.

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