What Happens If You Don’t File Taxes?
Don’t fail to file taxes, even if your income looks like a pittance. In fact, you might even get some money back.
Financial confession time: I didn’t file my taxes in 2012.
I know that’s particularly horrendous for a personal finance writer to admit, but it’s the truth. It was two full years before I had my come-to-Jesus moment about money. At the time, I was waiting tables and working an unpaid internship. I made all my money in cash tips, and I was saving for a cross-country move.
I was convinced I didn’t have the money for taxes. To be honest, I didn’t really know how taxes work, and I thought that I would owe the government a big check. As a waitress making less than $25,000, the thought of handing over my hard-earned money felt depressing. I just hoped the IRS wouldn’t care about me. I was a small fish in a big pond, so who would spend the time coming after me should I fail to file? I was wrong — very wrong.
What Happens If You Don’t File Taxes? My Difficult Lesson
The government wants its money, and it will come for it. It took another two years, but in the spring of 2014, I got a very scary letter from the state of Massachusetts to say that I hadn’t paid my state taxes. If they didn’t receive their money, they’d hit me with a very steep fine and prosecute me for tax evasion. That’s what they got Al Capone for! Not exactly the kind of company I wanted to be associated with.
What made things worse? I was completely unprepared to deal with my sudden tax nightmare.
I no longer lived in Massachusetts, and I didn’t know how to file a late tax return. I was still financially illiterate, and this letter scared me. It made me feel like with one decision I’d made at 23, I’d ruined my whole life. My negligence two years earlier came back to bite me in the butt.
Filing Taxes Late
I had to hire an accountant to help me because I had no idea where to start. I just wanted to fix the situation and keep myself out of trouble with the law. So I spent a lot of time sorting through old papers to find my W-2s from the two different restaurants I worked at in 2012. Since I had kept such shoddy records, I didn’t have any receipts to use to claim any tax deductions, either. I had to foot the whole tax bill.
My accountant filed both a state and federal tax return for me, and I had to pay a late-filing fine on top of my accountant fees (he charged $150 per hour for the work). In total, I coughed up $250 to my accountant and about $400 to the government. I also got a tax refund from the government, which was unexpected. Unfortunately, I had to use it all to cover the expenses I incurred for filing taxes late.
I owed the government was so little because I had made so little working as a waitress. If I’d had a higher-earning job and skipped out on my taxes, that bill would have been much bigger.
The Bottom Line on Failure to File Taxes
Moral of the story? File your taxes, even if you don’t make that much money. They’re an important part of your financial health, and they can come into play when least expected. Your tax returns can affect your health care coverage if you’re on the Affordable Care Act (ACA); and they can be used in the house-buying process, too.
I’m thankful that about a month after I got that letter, I managed to completely take care of my taxes. Still, I had to use about half of my emergency fund to cover the upfront expenses of my accountant and the fees. That was a demoralizing blow. If I’d filed on time, I would’ve gotten money back from the government that wouldn’t go towards late fees. Instead, I could have used it to boost my emergency fund or start investing in the stock market.
All I got by avoiding my taxes in 2012 was stress and a scary letter. At least I didn’t go to jail! Now I use that same accountant to help me with my taxes as a freelancer, and I meet the filing deadline every year. I’ve learned my tax lesson: Don’t fail to file, no matter how tempting.
Need help with your taxes? Consider using software like TurboTax.
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