Failing To File Tax Returns – Bank Levies And Garnishment – Q & A

Q.  About five years ago my business failed and I lost everything. Because it was my own business, I did not qualify to collect unemployment. I have been looking for a full-time job ever since but without luck. About two years ago I became homeless – I couldn’t even afford the cheapest of rent – which has caused me to rely on the good nature of family and friends. I know that some people call this couch surfing – but at my age – it feels more like homelessness.

Things got so bad that I neglected to file my tax returns for three years, which didn’t seem like a big deal at the time since my income from part-time work didn’t amount to beans. This was a big mistake. A week ago, the tax collector levied on my bank account garnishing everything I had – which amounted to about $700.00.  I have no way of paying a tax preparer to do my back returns. What should I do?

A.  Trouble often begets more trouble. I am truly sorry for your misfortune. The financial challenges you are facing are more common then you may realize. Unfortunately, people that are going through financial hardship is not a major concern to most state governments, which is why state and federal assistance programs have been cut so substantially in recent years. Having said that, here are the cold facts about failing to file your tax returns.

According to the state and federal tax agencies, all individual taxpayers are required to file their tax return or file for an extension on or before April 15. Your current financial situation is not relevant to your legal obligation to timely file your tax returns every year.  In some states, failing to file a return by the due date, can result in the assessment of five percent of the actual tax amount due for every month your return is late -up to a maximum of twenty five percent of the tax due.

Failure to timely file your income tax returns can and sometimes does result in having your bank account levied by the government. In your case, the state levied against your bank account for failure to file returns for three years. Unless it was an error, you will need to immediately prepare and file tax returns for those three missing years. Once your returns are filed, the levy which is also referred to as a bank garnishment, will be recalled by the government.

If the money that was garnished in your account was already sent to the tax collector and it is later determined you are entitled to a refund, then you will likely be sent one minus penalties and fees for filing your tax returns late. Some states are more aggressive then others in this regard.

Failing to file your taxes is also a criminal offence, normally a misdemeanor. While the general practice for failing to file your tax returns will normally only result in civil penalties including interest and fines, on occasion, the government will make an example of someone by filing criminal charges against them. Case in point, in February of 2013, former North Carolina State basketball coach Sidney Lowe was criminally charged for failing to file his state income taxes for three years.

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