If you’re not sure what happens if you don’t pay your taxes, you may want to know what the penalties are and how to avoid them. Here’s what you need to know about penalties for failing to file, interest on unpaid taxes, and losing your home due to tax sale. We also cover how to avoid legal action if you don’t pay your taxes. These penalties can have devastating consequences, but you can take preventive measures.
Failure to file penalty
You can avoid paying the failure to file penalty by submitting your taxes on time. In many cases, failure to pay your taxes is due to a lack of funds. If you do not pay your taxes on time, the penalty will be applied first to your tax balance, followed by any interest and penalty owed. The penalty you pay is usually the total of the penalties you owe, not the monthly amount. To avoid paying the failure to file penalty, you must file your taxes in full.
In some cases, a failure to pay penalty is much higher than the late payment penalty. A failure to file penalty ranges from 4.5 to 5% of the amount of tax you owe, plus interest, for each month you fail to pay. In these cases, filing a tax return late is a bad idea, and you should try to make all your payments by the original deadline. But if you can’t, you can request an extension. You’ll have until October 17 to file your taxes without incurring the late payment penalty.
Interest on unpaid taxes
California tax laws establish the interest rate on unpaid taxes. The rate is adjusted every year on January 1st. While the tax due date remains unchanged, the interest rate will apply for the next 365 days. If you miss the deadline, interest accrues for every month, or part of a month, until you pay the entire tax due. You must pay this interest before you will be able to keep your tax debts under control.
Unlike penalties, the IRS does not offer any interest relief, and will continue to charge you interest on your unpaid taxes until the balance is paid in full. If you owe taxes in full within a year, your debt may rise to several hundred dollars. Luckily, there is an alternative to paying the full amount and incurring interest charges. Depending on your circumstances, you can seek an interest waiver from the revenue services commissioner.
Loss of home to tax sale
When you don’t pay your taxes, you may lose your home to a tax sale. This happens if the property owner doesn’t pay their taxes within 14 days. Fortunately, there are options to stop this from happening. The city or town may sell or assign the right to enforce the tax lien, which you can do to stop it. Listed below are some options for dealing with a tax sale.
Once the tax sale has taken place, the homeowner has a certain period to redeem their home. This redemption period varies by state, but it is typically a year. This redemption period may begin before or after the sale. After the tax sale, the homeowner has a year to redeem their home. However, if the tax sale is scheduled to happen before the redemption period expires, the homeowner has no choice but to sell the property.
Avoiding legal action if you don’t pay taxes
If you don’t pay your taxes, you’ll most likely receive a notice of intent to assess, letter of inquiry, or bill that outlines the amount owed. However, before your debt goes to collections, you can work out a settlement by paying the full amount due, appealing your assessment, or entering into an Installment Agreement. The key to avoiding collection enforcement action is to act quickly.