Are you the type of person that usually avoids filing their taxes? Whether it’s an issue of not having enough money, or not knowing all the information that is needed, filing your taxes is an absolute must. You will have to face the very serious consequences of your actions. Sooner or later the IRS will catch the people who avoided filing their taxes. Failing to file your tax return will end up being more costly to you in the long run.
Those who do not pay their taxes will usually face a large criminal penalty, fines, and even imprisonment. If you make over a certain amount of money each year, you have to pay a tax on that income. This requirement is made known in the Internal Revenue Code.
Not filing your taxes and not paying your taxes are completely different. You will be penalized for both not filing as well as for not paying. If you calculate your return and realize that you do not have enough to pay, then you definitely don’t want to not file. You will end up paying a penalty of 5% per month. If you do not file you will have to pay 4.5% for not filing and 0.5% for not paying. The penalty can add up to 47.5% which is why you want to make sure you file and pay your taxes! The penalty you will have to pay is not worth it.
If you fail to file then the IRS might file a substitute return for you. This substitute return will not help to save you money. Usually if you were to do this on your own, your accountant might include standard deductions, but this would not. The bottom line is that you don’t want to end up spending more money.
If you owe the IRS money, you will receive a bill called a Notice of Tax Due and Demand for Payment. You will not only be paying the money you owe, but you will be paying interest and penalties. You definitely want to make sure you pay off anything due as soon as possible.
If you can’t pay your bill in full, you will want to pay as much as you can towards your bill. This will help you in the long run. It will reduce your interest and amount you owe in penalties. An installation agreement is a way to pay a certain amount per month . This is more manageable and easier for you to afford.
The IRS might give you an option of a temporary delay on collecting your bill. The IRS will review and determine your ability to pay.
You may qualify for an Offer in Compromise. This means that the IRS will settle your unpaid accounts for less than the full amount that is due. You must fill out an application to be considered, and the application is $150. This agreement is only considered if all the other options have been explored and did not work.
At the end of the day all taxpayers should file all tax returns regardless of how much is due and if they can or cannot pay it. You definitely do not want to be in a situation where you are paying extra in interest, penalties, or receive imprisonment.
Source: Legal Zoom