All too often, people who will wind up owing the IRS are too afraid of sending in a return. Then, there are the people who don't believe they made enough money for it to matter. These people find out the hard way just how much damage an unfiled tax return can do.
Let me take you through the consequences an unfiled tax return brings. When your tax return is unfiled, the IRS still receives all of your income information. They get information from your employer, people who contracted you, and financial institutions. Every cent of recorded income that you made, the IRS will receive during tax season. If the IRS sees that your taxable income would have required a tax return that is unfiled, they file a Substitute for Return for you. All Substitutes for Return follow the same filing rules:
- You will be filed as Single or Married Filing Separately, depending on your last recorded filing status.
- No tax credits, deductions, or dependents will be used to fill out the return.
- You will taxed at the highest possible rate. (This is double the national average.)