Thursday, 25 April 2024
The big day for filing tax returns for the year 2018 is April 15, 2019. There are less than 100 days left for you to get your paperwork in order and file that electronic report.
If anyone encourages you to procrastinate or not file your taxes on time, that’s the worst advice you’ll ever get concerning your taxes.
Tax filing is a drag and many feel like it’s giving away your hard earned bucks. However, it is unavoidable. As Ben Franklin said, you can only be certain about death and taxes.
The exercise of filing taxes is so complex that many Americans end up procrastinating it. Others spend too much cash hiring accounting firms, yet they don’t know if what has been put on record on their behalf is accurate.
In a letter published by efile.com, one time US Secretary of State, Donald Rumsfeld, wrote to the IRS in April 2014 and described the tax return process so complex that he, a college graduate, and his wife, also a college graduate, had no idea of whether their returns were accurate.
Nonetheless, you don’t want to mess with Uncle Sam. Here’s a look at what happens when you forget to file your taxes or worse if you fail to pay your taxes.
For starters, failure to file is not the same as failure to pay. You may be a few days or weeks late on filing your returns but that doesn’t mean that you have failed to pay.
If you are late on filing your tax return, the Internal Revenue Service (IRS) will assume some negligence or intentional fault resulting in an underpayment, therefore, impose a penalty on you.
The failure to file penalty is usually assessed by IRS officials and charged at a rate of 5 percent per month or fraction of month, on any tax due, up to a maximum limit of 25 percent.
For instance, if you file your taxes 35 days late and along with the tax filing you submit a $ 6,000 check for tax owed, the IRS will penalize you twice. For failure to file (FTF) and failure to pay (FTP). The charges applied will include 5 percent of $ 6,000 for the failure to file and 5 percent of $ 6000 for failure to pay, totaling to $ 600.
On the other hand, if you failed to file but expect a refund, the IRS will not charge a failure to pay penalty. Nevertheless, you ought to file your taxes before the three-year time limit for claiming your refund expires.
According to the IRS, a failure-to-file penalty may be appropriate if you did not file by the tax filing due date. Â On the other hand, a failure-to-pay penalty may be valid if you did not pay all of the taxes you owe by the tax filing deadline.
The procedure for filing your taxes while late differs from the on-time or regular tax returns. You can learn about how to make both on-time and late filings accurately on Fresh Start Initiative.
This is basically notifying the IRS that you are aware of the tax filing due date but you cannot make the payment or file the returns by April 15th. The IRS has made this process convenient and you can fill a Form 4868 and request for an extension.
The best part is that you don’t have to give any explanations for why you need an extension, Uncle Sam will get in touch with you in case the request is denied. Moreover, you can make the application electronically or physically, just do it before the due date.
In as much as you can apply for an extension, you are required to correctly estimate any tax due and file not stretch the extension even by a single day. In addition, filing for an extension does not absolve you from paying any interests on tax owed.
So, we are back to where you started, pay your taxes by the regular due date – even if you’ve applied for an extension.
But the Uncle Sam isn’t as inhuman as many people would like to describe the government agency. According to the IRS, you will not incur any late filing, or late-payment, penalty if you can produce a justifiable reason for not filing or paying on time.
Despite the various concessions and PR exercises by the IRS, there still some Americans who don’t file – and by extension – don’t pay taxes for extended periods. Some do it out of political differences, some fail to pay due to personal problems that create confusion in their finances (such as divorce or death) while others do it fraudulently, to avoid tax liability.
Whereas the IRS will excuse those who can prove that they failed to file and failed to pay due to genuine reasons, or there was no willful neglect; those who mischievously or fraudulently failed to pay taxes, face a rough Uncle Sam.
The IRS can recommend for criminal prosecution of those who fraudulently fail to file taxes. Worse still, because their objective is not to incarcerate more people but to maximize revenue collection, the IRS can impose a series of forceful measures to recover taxes that are due.
The IRS taps into a vast source of information. Employers send in their employee data, banks and financial institutions make regular reports to IRS concerning their clients. The odds of not paying taxes and getting away with it are just too low. Uncle Sam may be large and slow, but his wheels turn, and the longer you wait, the more stressful and more punitive it’ll be.
Some of the Actions the IRS May Take Against You Include
If the IRS determines that the failure to pay was due to willful neglect or fraudulent intent, the penalties could be hiked to as high as 75 percent of the total tax owed.
If you’ve not come to an agreement with the IRS on how to make payments for your tax bill, Uncle Sam will institute forceful recovery measures. If you think owing to the mob, the bank or Credit Card Company is bad, a tax bill is what you don’t want lying around for too long.
If you are employed, the IRS could compel your employer to make remittances towards your tax bill deducted from your paycheck. If you are self-employed, credits towards your social security, retirement or disability benefits will be blocked. Therefore, if you are a freelancer, don’t forget, or fail to report your freelancing income in the tax file.
If you own a home and fail to pay taxes, the IRS will place a federal tax lien on your home. What this means is that the IRS will place a caveat on the ownership of your home. Any attempt to sell it will see the IRS receive proceeds from the sale. The payment will first pay off the tax bill before you get any dime.
The IRS can seize ownership of your home or car or even clear the balance from your checking account.
Tax liens and property seizures are captured in your credit report, so you’ll be without your property and it’ll take away points from your credit score.
Other measures that the IRS could take include recommending for the withdrawal of your passport, and finally recommend for criminal prosecution.
But as Mentioned, Uncle Sam isn’t entirely machine, the IRS still makes avenues for those willing to file returns and make payments.
You can make an agreement with the IRS where they make the return for you. However, the information in the return will be purely from sources the IRS can construct about you. Therefore, you will stand to lose on any additional exemptions or expenses you may be entitled to. Also, the IRS estimate may overstate your tax liability.
You may negotiate and enter into a deal with the IRS where you make payments for the tax due in installments until the entire amount is settled.
Lastly, Uncle Sam may accept payment of a smaller amount now rather than institute the forceful recovery measures to recover the entire amount later.
Remember, the objective is to collect revenue, not kill the tax-payer.
To conclude, filing taxes can be a stressful and expensive activity. Now that you know what happens when you forget to file your taxes, don’t let lack of cash hold you back.
If you are low on cash and don’t want to be late for the April 15th due date, get in touch with an affordable, competent, solution provider. A visit to Turbo Tax is an excellent spot to get started.
Whatever the scenario may be, don’t forget to file your taxes. File your taxes even if you cannot make tax payments immediately. Moreover, ensure that you have no pending tax bill. As you’ve read, Uncle Sam is smart, and not very nice to defaulters.
Source: https://www.everybuckcounts.com/what-happens-if-you-dont-pay-your-taxes/
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