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Only once you file your taxes, does the 10-year statute of limitations on collections begin. That means years down the line, the government agency has the right to assess and collect on taxes. If you fail to file your taxes, whether you’re owed a refund or you owe the IRS money, there’s no statute of limitations on tax collection. While both can increase your overall tax debt, the penalty for not filing taxes is more severe than it would be for filing on time, but not paying your amount due.įailure-to-File Tax Return Statute of Limitationsīy law, the IRS has no time limit on collecting taxes, penalties, and interest, so you may face hefty fines that add up each year you do not file. The latter carries a much smaller penalty at 0.5% of unpaid taxes per month up to 25%. The IRS considers failure-to-file a more serious issue than failure-to-pay.
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What’s Worse: Filing Late or Making Late Payments? When both apply, the maximum amount charged for the two penalties is 5% per month. If you owe taxes to the IRS, file late, and submit a payment late, you’ll be subject to penalty charges and interest for both. Yes late filing and late payment penalties are not the same. What Are My Options?Īre There Different Penalties for Failure-to-File and Failure-to-Pay?
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