Let’s say you woke up today from unsettling dreams which you suspect, at first, were brought on by the unseasonably warm weather. But as things get clearer, that doesn’t seem right. Your sheets are soaked through with sweat. You feel somehow less rested than before you went to sleep. You have a vague sense of having done something wrong, having missed something, but you can’t put your finger on it. Fortunately you have not turned into a bug, nor are you under arrest.
You probably forgot to file your taxes. And you forgot to ask for an extension.
Well we’ve got good news. While you do deserve punishment for being so lazy, distracted and perhaps dishonest, you won’t get it, exactly. This is actually a simple process! No special forms! Maybe no penalties! Aside from the free-floating sense of guilt, sorting this out will not be a Kafkaesque pursuit. The IRS is, at least in theory, more user-friendly than it used to be.
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“Filing a past due return may not be as difficult as you think,” says the IRS’ website. And they also recommend, gently, in the measured tone of someone who knows they can destroy you, that “it’s important to understand the ramifications of not filing a past due return and the steps that the IRS will take.”
“Taxpayers are encouraged,” the IRS writes, “to pay the taxes they owe in full.” And if you cannot pay what you owe in full, there are advantages to filing anyway. Besides, they’re the IRS; they will figure it out at some point. The menacing tone that lies just beneath the surface of these understatements is clear: Don’t. Even. Try it.
And if you’re young, you probably don’t earn most of your income from capital gains or consulting work, so the odds are you don’t owe a tremendous amount of money. Odds are the government owes you some money, especially if you were working a summer job in college, for instance: they withhold taxes on a weekly paycheck assuming you continue to make that amount of money for the whole year. They don’t know you’re just slinging hash for the summer — they think that’s your life.
So especially for the broke college students among us, who forgot about taxes during midterms or whatever, there’s good reason to be vigilant about filing, even if you’re late: Uncle Sam might owe you some money. And it’ll come right when you need it: at the end of the school year, when things look their bleakest, financially and otherwise.
What to do if you don’t owe
Great news: if you are owed a tax refund, you don’t pay a penalty for filing late. It actually shouldn’t be so shocking that the government doesn’t charge you a penalty for asking for the money that they owe you at your own convenience, but that it certainly feels that way speaks to just how intimidating the IRS is.
Your tax refund doesn’t go anywhere for the three years following the filing deadline you missed. It’s available to collect, so long as you file, until April 15, 2015 (or October 15, 2015, if you got an extension, which you didn’t). If you fail to claim it after three years, however, the government takes it as a donation. If you neglected to file in 2010 and you’re owed withholdings, you can still get it. Forgot to file in 2009 — too bad!
In fact, you can still e-file your 2011 return until October 15, 2012. After that, for the next 30 months, you’ll need to file a traditional paper return — people still do this. If you feel like the federal government might need your extra tax dollars — they most certainly do, by the way — just don’t file a return, ever. Of course by not filing, you run the risk of not paying taxes you do, in fact, owe, and then you’d be a criminal. And we don’t want that.
But really, file your taxes
Just file! Even if you’re filing late. There are penalties for not filing when you do, in fact, owe, and the IRS will draw up a tax bill for you without asking you for itemized deductions and the like that you may be entitled to.
If you fail to file and you owe, the IRS will tack 5 percent onto your tax due for each month you fail to file. This penalty is capped at 25 percent. If you file but fail to pay, the IRS will charge you 0.5% a month with no maximum penalty. Even if you don’t have a penny to your name, you’d be wise to file and not pay. The IRS is willing to work with you.
Your state might be less friendly — New York, for example, is notoriously malicious. States can’t run deficits after all, so every penny counts in a way it does not on a federal level.
Like a credit card, but better?
The IRS charges just 3 percent on underpaid tax debts, and it is therefore better to stay in debt to them than to transfer this debt to a credit card with the national average more than three times that rate. That said, if you must, here are a few tips and tricks when doing so.
The bottom line is that it’s just unwise not to file. As anyone who has actually read The Pale King knows, there are hordes of people whose job it is comb through taxes and make sure the government gets its money, and they’re absolutely miserable.
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