It was all the way back in 1789 when our dearly departed Benjamin Franklin wrote a letter ending with the words:

...but in this world, nothing can be said to be certain, except death and taxes.” As dark and grim as it may seem, it’s true. Those are two things we can count on- and one of them comes about every single year.

Tax time in America is a time of deep frustration, anxiety, and cold sweats for many people. Questions like “How much will I owe?” “Will I get a refund?” and “Did I miss the deadline?” are on the minds of people constantly. It would be so much simpler if we did not have to pay taxes, right?

Regardless of your feelings about it, the truth is that we all have to pay taxes. Not doing so can cause a lot more trouble and stress than just confronting them and getting it over with. Like it or not, there are consequences for not paying taxes or filing them.

Consequences For Not Paying Taxes

Let’s start by being clear on the fact that not everyone will experience the exact same consequences. It really depends on how much you owe and other factors. For instance, if you just forgot to file one year, you can usually straighten it up pretty easily without a lot of fuss. However, people who have not filed or paid taxes for several years and owe a large amount can expect some serious issues. The following are the most common consequences to expect, starting with the easiest to manage. 

1. Failure to File

If you do not file your taxes on time, you will face a failure to file penalty, which is anywhere from 5 to 25 percent of your total taxes owed. That penalty is charged each month you are late. 

It gets worse, though. If you are more than 60 days late filing, they also tack on a minimum of $135 extra or 100 percent of your taxes. That’s a lot of extra taxes to worry about. 

Let me put this into perspective for you. A few years ago, I filed my taxes online- as I normally do- early in the year. For whatever reason, I was informed through the software that my state was not yet accepting returns, so I would have to come back later to file. So I filed my federal and made a note to complete the state taxes later. 

Well, life happened. Four kids, work, and a two file neverending to-do list- yeah, it slipped my mind. I went on about my life until I received a notice the next year when I filed that my state refund would be covering penalties for not filing state the previous year. It took three years of state refunds to make up for the one teeny, tiny state tax bill. It was not fun, so do whatever is necessary to remember to file. Write it on your mirror, your forehead, or anything else you can think of to make sure you do not forget.

2. Failure to Pay

On the opposite end of failure to file is those that file taxes but do not pay what they owe. If this is you, you are looking at a failure to pay a fee of anywhere from 0.5 percent of your taxes owed up to 25 percent. 

Most of the time, the failure to pay penalty is much lower than the failure to file. Therefore, even if you feel you cannot make payments yet, go ahead and file anyway. It will likely cost you a lot less to pay late than it will to just not file.  

Those who continue to avoid their tax debt can start losing money they earn every week or month. I mentioned above that the IRS can take your tax refunds- for as many years as it takes to clear the debt- but they don’t stop there. They can also garnish your regular wages, and that alone can be difficult to deal with if you live check to check.

Now, let’s go a step further. Imagine your grandmother passes and she left you an inheritance. Well, they can also take that, and pretty much any other money you have coming to you. 

As a side note, if you owe back taxes when you pass away, your loved ones should not have to repay the debt out of pocket. However, if you plan to leave an inheritance or estate behind to them, the IRS can take their money out of that before your loved ones get their share. So, in a way, they still have to pay for it. 

Here’s a question for you: Do you travel out of the country? Sadly, one of the consequences of not paying taxes is that you can lose your passport privileges. Granted, you typically have to owe more than $51,000 to lose your passport, but still. 

This loss may not affect some people, but for others, it can be life-altering. Even if you don’t travel, though, you can lose things that are important to you. Your house and car are just two examples. The IRS can lay claim to any assets you have. 

If you thought those mail notices were irritating, just wait until the IRS is literally knocking on your door. This typically only occurs when you owe very large amounts of back taxes, so you can imagine how sweat-inducing these visits can be. 

If that’s not bad enough, though, understand that things can start moving rather quickly once these people show up. These enforcement officers have the authority and the inclination to enforce actions to take place quickly. So, while you may have had time before to remedy the situation, once an enforcement officer shows up, be prepared to fix it immediately. 

Another of the various consequences for not paying back taxes is dealing with debt collection. Sometimes, the IRS will send your debt off to a debt collection agency, and then you get to deal with all of those lovely phone calls and bills.

Whether it is the IRS themselves filing a lien against you or a debt collection agency, this can cause you additional problems. Liens are public records, and debt collection agencies report to the credit bureaus. Therefore, both can impact your ability to gain credit in the future. 

Unfortunately, the last on this list of consequences for not paying taxes is the worst- prison time. Yes, you can go to prison for failing to pay taxes. To be fair, though, this is an extreme consequence, not typically something you have to worry about initially. It is more so for people who go for very long periods without paying, who owe a whole lot of money, or who intentionally and consistently avoid paying taxes. Still, it’s best not to take chances.

How to Prevent Consequences for Not Paying Taxes

There are plenty of things you can do to prevent dealing with these consequences. The first is, of course, filing and paying all of your taxes on time. Keep up with all deadlines and due dates in whatever way you need- paper calendar, digital planner, whatever you have to help. 

Having said all of that, I’ll be the first to say that stuff happens. Sometimes, no matter how hard you try, things can slip right by you. All it takes is a sick kid or family member, or some other unexpected issue to arise, and you can find yourself way off track with everything. 

So, let’s say life was not perfect, and you are now late filing or paying your taxes. Good news:

There is still plenty you can do to fix it quickly.

Conclusion

One of several reasons people end up in difficult financial situations is that they face trouble and feel they have no control over it. As such, they let the chips fall where they may and hope for the best. 

The good news is, though, that you are never, ever helpless with anything- and that certainly includes tax debt. With a little work and commitment, you can avoid all of these unpleasant consequences for not paying taxes.