Nobody likes paying taxes, but it’s a fact of life – we all have to do it. Taxes pay for everything you could possibly think of (and some things you don’t want to think of)…but what would happen if you didn’t pay your taxes? There are many stories out there about people choosing to not pay their taxes or people saying that taxes are illegal, but rest assured – you have to pay them, and the IRS will make sure of it one way or another!
Before going into the nitty gritty of what happens if you don’t pay, I must tell you that there is a difference between not filing your taxes and not paying what you owe. A big difference. Of the two, not filing is way worse than not paying what you owe, as by not filing the penalties are much, much higher. The amount you owe to the IRS, if you don’t file, is penalized at 47.5% interest (22.5% for late filing and 25% of the total for not filing). That is a pretty massive penalty! If you file but just don’t pay what you owe, the penalty is 5% per month. It’s a big difference.
However, what exactly happens if you don’t pay, either on purpose or by accident? From what I have garnered, the IRS likes to send you letters – lots of them. They want to give you the benefit of the doubt at first, by sending little reminders just to see if maybe you forgot or you are just late in getting your return in. If they don’t hear back from you within 3-4 months, there are a few things that could happen. First off, the IRS could decide to send you a “Substitute For Return“, which is basically them deciding what you made for this tax year and telling you what you owe to them. Yep, they would make a tax return for you and ask you to pay the bill. This amount is based on several previous years of returns, and you would owe the tax plus fees and penalties. If they don’t go this route, they could send a tax revenue officer after you, who would work on getting you to file and pay your taxes owed. And if this doesn’t work, or if it’s been a long time that you have been evading taxes, they could send a special agent after you – and this could lead to criminal charges for tax evasion. This can lead to the IRS seizing your home, car, other assets, freezing your bank accounts or even sending you to prison.
The bottom line? Pay your taxes. It might not be fun, it might not be fair, it might not be right, but it’s the way it is. And if you think you can get away with not paying them, think again – they will catch you eventually. While the time limitation for auditing a return is a mere 3-6 years from the due date, depending on why the audit is being done, the time limit for finding tax evaders is 10 years. Think you can outrun the IRS for 10 years? Think again.