I’ve already stated my disdain for doing my taxes. For whatever reason, I just dread doing them every year. That said, I pretty much have everything put together and ready to go. I just need to print out a few of the statements to have in the file. Yes, my taxes will get done. As much as I don’t like doing it, I will continue to do it every year.
It amazes me how many people I come across who question whether they should even bother with filing. There are a lot of reasons why they question and we’ll take a look at some of the most common situations.
To start us off, “Why should I bother filing my income taxes?”
Most people who are employees have been paying their income taxes throughout the year. It’s just automatically deducted before you even get your paycheck. Depending on your situation, you may well get some of that back. If you fall into just the right group, you may even get more than that back.
If you let the government hold on to it for you, you won’t get any extra interest back when you do get around to filing. Why not claim the money now and pay down some debt (saving you money) or invest it (making you money)?
So you already know you are going to owe. And if you don’t file, they won’t know. And what they don’t know won’t hurt them. Right? Well, true. It probably won’t have much impact on the government. But it could really hurt you. If (when) they do catch up with you, you will still owe those taxes, and penalties, and if you don’t pay them directly, they can just show up and start claiming your stuff until they have enough to pay your debt. Buh bye glamorous lifestyle. You may even get to take a little timeout at one of our federal correctional institutions.
“But, I won’t get my refund back anyway because I owe some debt.”
Two of the big items they will garnish your tax return for are unpaid child support and delinquent federal student loans. But if you would normally get a return, they already have your money anyway. If you file, at least that amount will get applied to your loans and reduce the overall amount you owe. You really end up walking away even as far as your wallet is concerned.
“What if I didn’t make that much money this year?”
Well, what do you consider ‘not that much’? According to the IRS, if you, a single person under the age of 65, made less than $10,400 in W-2 (employee) earnings last year, the IRS doesn’t require you file. Married and filing jointly? The threshold is $20,800 combined income. Self-employed? If you made more than $400 from your own business last year, you will need to file.
Even if you are under those limits, you may still qualify for a refund, so it may still be worth it.
“They won’t really chase me down, will they?”
Well, in 2016 (the last year I could find data for) the IRS initiated only 206 non-payment investigations. Oh, but wait. Of those 206 cases, 159 were found guilty and sentenced. 80% of them received a prison sentence and averaged 38 months served. I’ve visited prisons, both state and federal. It’s not exactly a high number that end up in prison considering the population of our country. But my visits were enough to convince me I definitely do not want to spend any time there, let alone 38 months. No thank you. Especially considering the little effort it really takes to file.
But I guess if you are ok with 3 hots and a cot, then take your chances. That’s up to you.
If they find something in last year’s taxes, what will they find when their investigation digs into the last 7-10 years of your returns?
“What if I end up owing the IRS and can’t pay?”
If you end up owing and can’t afford to pay it, you can set up payment plans with the IRS. Oh yeah, and according to a story from CNBC, the ‘failure to file’ penalty can be 10 times the penalty of filing and then not paying. Were I to take a penalty, I know which one I would rather take. From what I have read, the IRS really does appreciate effort. Things may not go exactly as they would like, but if you are filing and communicating, they are probably going to at least be easier to work with.
Need some help filing your taxes? Don’t call me. I don’t even do my own taxes. But I understand why I have them done. If you aren’t sure, a professional can be a big help in getting things right. After all, you would probably get professional help for that tight, painful feeling in your chest. Why not your taxes? Can’t afford your own professional? There are a number of places that can help. Check with your local library, the VITA program, or 211 for recommendations.
Need help finding money to make payments or figuring out what to do with that return you have coming? Now that we can help with. You can schedule a confidential appointment with a Center for Financial Resources counselor by going online or calling us at 605-330-2700.
written by Breck Miller
images courtesy sodahead.com and freedigitalphotos.net, respectively