What happens to unpaid taxes at the end of the tax year?

Unpaid taxes at the end of the tax year accrue interest and penalties. This means that if a taxpayer does not pay their tax liability by the due date, the IRS will add interest on the unpaid balance, which increases over time. Additionally, penalties may be imposed, which are additional charges typically based on the amount of taxes owed and the duration of the delinquency. This is designed to encourage timely payment of taxes and to discourage taxpayers from delaying their tax obligations. The accrual of interest and penalties makes it financially more burdensome for individuals to carry unpaid taxes into the next year, stressing the importance of addressing tax liabilities promptly.

The other options do not accurately reflect what occurs with unpaid taxes. They are not forgiven; unpaid taxes do not transform into loans; and taxpayers cannot simply deduct unpaid taxes in the subsequent tax year. Understanding this mechanism emphasizes the necessity for taxpayers to stay informed about their tax obligations and the importance of making timely payments.