12 terrible things that could happen if you dont do your taxes

12 terrible things that could happen if you dont do your taxes12 terrible things that could happen if you dont do your taxesTax seasonis right around the corner.If you dont file and pay your taxes, the things that could happen to you may cause far more than a headache.Julius Green, tax partner and leader ofBaker Tillys tax practice in the Philadelphia region, explained to Business Insider the potential consequences of letting the deadline come and go without filing.Granted, you arent guaranteed to suffer behauptung consequences, and everyones tax situation is different, but here are a dozen terrible things thatcouldhappen if you dont do your taxes.Pay a penalty feeThere are two kinds of not doing your taxes - failing to file and failing to pay. If you fail to file, you get hit with a penalty of 5% of the tax owed, up to five months out, with a minimum penalty of $135, or as much as 100% of the tax owed - whichever is less, Green says. If you dont pay, he continues, youre typically charged a penalty, plus youll have to Pay interestStatutorily, the IRS cant waive interest, explains Green. They want the time value of the money you owe them. If you fail to pay, you may be paying a penaltyplusinterest, which is usually determined by thefederal short-term rate(anywhere from 1%-4%), plus 3%, for a total of 4%-6%.Get notices from the IRSIts probably fair to assume that no one wants mail from the IRS. But if you dont file or dont pay, thats exactly what could happen. The IRS gives you multiple opportunities to get it right, says Green. They have to send you a notice before taking any action, and usually they need a response in 30-60 days. But many people in this situation know its coming, so they panic when they get their notice and shove it in a drawer to deal with when they have the money.But heres the thing Whether you have the money or not, if you dont reach out to the IRS upon receiving a notice, they could start taking action. What kind of action? Well, they can make you Forfeit your refundIt makes sense when you think about it. If you owe the IRS money, the agency is not going to hand over any until you pay. For example, if you didnt file taxes in 2014 and the IRS is after you, but you did file for 2015 and are due a refund, you may never see that money. The IRS could simply hold onto it. They can also make you Give up your Social SecurityThrough whats called the Federal Payment Levy Program, the IRS has the ability to attack certain assets after going through the appropriate notification process, explains Green. While they cant inhibit your ability to earn money, take your work tools, or appropriate certain benefits like those paid to your children, Social Security is one thing they can seize.It sounds technical, but basically, a lien is a claim the IRS makes to your property. This claim, however, isnt another notice you can shove in a drawer. According toIRS Publication 594, a lien is a public declaration of the agencys claim to your pr operty in relation to your other leistungspunktors. Not only may it be filed to employers, landlords, and creditors, but the lien can make you Lose ground on your credit reportAn unpaid debt to the IRS is just like an unpaid debt to anyone else, and it will appear on your credit report. People dont realize that your credit report reflects your tax liens as much as any other outstanding debt, says Green. We wont even pretend that it could be considered good debt.A lien is a claim to your property a levy is the actual taking of it.IRS Publication 594makes it clear that in some cases, the agency can appropriate your house or car, not to mention your income or bank account.They might restrain themselves if its agreed that youre suffering economic hardship, which means their seizure would hinder your ability to meet basic, reasonable living expenses. Plus, the publication reads, If theres money left over from the sale of your assets after paying off your tax debt, well tell you how to ge t a refund. Make of that what you will.Receive a summonsIf the IRS is having trouble sorting out the taxes you owe, you could get a summons - thats a legal requirement to appear - to meet with an IRS officer, and bring appropriate records, documents, and possibly even testify.It wont necessarily be you who is asked to meet with the agency A third party with information relevant to your case, such as a record keeper from a financial institution, could be summoned instead. If the IRS is simply gathering info, youll be informed of the third-party summons, but if its in reference to money its already clear you owe, you might not even find out.Declare bankruptcyLets hope it doesnt come to this. People who might declare bankruptcy are the people who couldnt pay their taxes because they couldnt afford to pay their mortgage or expenses and get caught in a bit of a bind, explains Green. Usually its people who are caught for three or four years not filing, spending the money they didnt pay the IRS on things to try and stay above water.Remember that bankruptcy isnt magic While in certain cases, a tax debt can be discharged, if it has turned into a tax lien, it might not be erased. Instead, clarifies Green, the IRS will generally suspend the debt and seek to collect it after bankruptcy.Serve jail timeWhile jail is unusual for most well-meaning citizens, it is a possibility. If the government deems that youve willfully failed to file or filed fraudulent returns, they could see it as an attempt to defraud the government, says Green. In cases where jail time becomes an issue, you typically see two things a lot of income being hidden from the IRS, and a pattern or some evidence of wrongdoing. Unless youre a dishonest high roller, its unlikely that the IRS will pursue a jail sentence.Deal with the IRS for a decadeDid we mention that the government has the right to pursue unpaid taxes for 10 years? While there are certain appeals and exceptions for individual cases, if youve been a negligent taxpayer (or rather,non-taxpayer) you can look forward to a long and close relationship with the IRS.However, theres hopeThe absolute best thing you can do if youve neglected to file or pay, says Green, is reach out to the IRS immediately. It may seem counterintuitive, but the agency is more likely to look kindly on someone who admits theyre off track and wants to work it out than someone who has been lining the litter box with their notices. You may be able to negotiate a payment plan or even a reduction of the total owed.You shouldnt panic upon getting a notice from the IRS, says Green. There is some recourse, but your options are more limited the longer you wait to engage.This article was originally posted on BusinessInsider.