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Civil and criminal penalties for failure to file tax returns

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Civil and Criminal Penalties for Failure to File Tax Returns

Income taxes are due to the IRS on or before April 15th each year. That means, unless you requested an extension, you must file your tax return and pay your tax by April 15th. An extension gives you time to file the tax return but taxes need to be paid by April 15th.

Civil Penalties

The IRS can impose separate civil and criminal penalties for failing to file taxes and failing to pay taxes.

The IRS assesses civil penalties as follows:

Failing to File

If you fail to file your tax return by the deadline, the IRS will charge 5% of your unpaid taxes for every month you are late filing. The maximum penalty is 25%.

If the IRS believes you fraudulently failed to file your tax return, you could face a 15% fraud penalty for each month you are late, up to a maximum of 75% of the tax in addition to the tax.

Failing to Pay

If you file your taxes on time but fail to pay what you owe, the IRS will impose a penalty of .5% per month for the unpaid amount. This penalty caps at 25%.

Failing to Pay and Failing to File

If you neither file your tax return nor pay them by the deadline, the IRS will charge a 5% penalty based on the amount you owe for not filing, plus 0.5% per month for not paying. This will be imposed for every month your taxes are late. On top of that, the IRS will also charge interest, which is compounded daily, on the unpaid taxes.

Criminal Penalties

Many people who did not file or pay their taxes one year are apprehensive about submitting their tax returns the next year, fearing the consequences they might face from the IRS. However, the IRS is more likely to identify a perennial non-filer and/or non-payer as time passes, and more severe penalties can ensue. In addition to penalties and interest, if you continually fail to file tax returns or pay your taxes on time, you could face criminal charges and the possibility of a federal prison sentence.

You could be accused of willfully failing to timely file and/or pay taxes, which is a misdemeanor offense. If convicted, you could face a prison term of up to 1 year for every year you did not file or pay.

The IRS could also charge you with tax evasion. This offense is a felony that is penalized by up to 5 years in federal prison for every year you willfully evaded tax by not filing your return or payment on time.

The IRS, working in conjunction with the U.S. Department of Justice, will decide whether to charge a felony or misdemeanor. Their decision will be based on the particular circumstances of each case.

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