As a citizen of the United States, you need to learn as much as you can about the tax system. While it's complicated, knowing the basics will go a long way in keeping you out of trouble.
Here's something you need to think about: You need to file your annual tax return on time.
It doesn't matter if the government owes you money or you owe additional taxes, nothing changes the fact that neglecting to file your tax return can lead to serious complications.
For instance, if the government owes you, you only have three years from the filing deadline date to receive your refund.
Conversely, if you owe the IRS more taxes, you will face a failure to file penalty, which is five percent of your unpaid bill for every month after the deadline. This is capped at 25 percent. Depending on how much you owe, this can easily reach into the thousands of dollars.
You can expect the IRS to send you reminders if you neglect to file your return. The agency also has the right to file a substitute return if you neglect to do so. Since they may not use the credits and deductions you are entitled to, a substitute return could cost you money.
If you are a chronic non-filer, meaning you make this an annual habit, the IRS can take more serous action. For instance, this could lead to a large fine or even prison time.
It may not sound like a big deal, but neglecting to file your tax returns can lead to serious trouble.
If you find yourself in trouble with the IRS, don't hesitate to learn more about your legal rights so that you can take immediate action.