Biggest Tax Time Mistake Is Not To File You Return

There are a lot of mistakes one can make at tax time. One of the leading mistakes, in fact it is absolutely the biggest, is to fail to file a tax return on time. That particular mistake can also cost a person plenty, especially if the person is in bankruptcy or needs to file bankruptcy.

The temptation not to file a return is sometimes great.  One may know that s/he owes taxes, but is faced with a situation in which the money to pay the taxes is simply not available.  This common situation may leave one confused as to how to best proceed.  Unfortunately, the option often selected is to not file the return at all.  This is in fact exactly the wrong way to proceed.

You see, the IRS penalizes you TEN TIMES as much for not filing a return as it does for just failing to pay the taxes owing! Ten times. The penalty for failure to file a return is 5% of the amount you owe; if you file the return but can’t pay the tax, the penalty is 1/2 of 1%.

Now, that this little fact impact a bankruptcy? Well, if you are considering a bankruptcy filing  your bankruptcy attorney and bankruptcy trustee will require a copy of your most recently filed tax return.  Delay in filing a tax return can (and usually does) result in delay in obtaining a bankruptcy discharge and may case a dismissal of the bankruptcy altogether.  Moreover, a bankruptcy may actually help address the unpaid taxes.  For instance, a Chapter 13 case will give the taxpayer up to five years to pay off the taxes, usually with no interest or penalties. 

So, file those tax returns – even if you do not not have all of the money to pay the taxes.  If you have any questions and need help, call us to arrange a free consultation.