Every year, an estimated 7 million taxpayers in the United States do not pay their required taxes on time. This late tax filing results in about a $28 billion loss for the government. This large deficit impacts the programs run by the government, providing them with a strong motivation to make sure that all citizens and working residents pay their taxes in a timely manner. This means, there are a variety of penalties and legal consequences that can occur from failing to pay taxes, leading many people to seek IRS tax help about tax debt resolution.
For people who have failed to pay their taxes on time, but want to file them right away to avoid potential penalties, there are a few important pieces of information to keep in mind. Here is what all people should know about late tax filing.
Late Tax Filing: Some Pointers On Late Tax Filing
What should someone do if they have not filed their tax return on time?
Someone who did not meet the deadline for filing their taxes should file their taxes as quickly as possible. A common excuse people cite is that they do not have the money to pay the taxes, and so they want to wait until they have the right amount saved. This strategy, however, does not help the taxpayer. It can actually make the penalties even larger. Failing to file tax returns in a reasonable time frame can result in the loss of tax credits and refunds, potentially losing credits towards Social Security, and having fines added to the total amount due.
Taking a careful look at the penalties assessed can also provide strong motivation to encourage you to file in a timely manner. The IRS charges a Late Payment Penalty at the rate of .5% of all unpaid taxes for each month that the taxes are unpaid, up to 25 percent of the taxes owed.
On the other hand, if you do not file on time, you will be charged a Late Filing Penalty of 5% of the unpaid tax that accrued, up to 25% of the unpaid taxes. Taxpayers who have missed the deadlines should file their forms as quickly as possible to minimize the impact.
It is important for all tax paying citizens to also note that if the IRS believes they deliberately and willfully failed to file a tax return, they can also be targeted for federal criminal prosecution. Of course, the probability of this happening may be small, but the risk remains.
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What options do you have when you cannot make the tax payments on time?
The IRS offers you a few different options if you cannot make your tax return on time. If you believe you will have the money available soon, you can contact the IRS either through their Online Payment Agreement Application or by calling them directly to set up either an “Installation Agreement” or an “Offer in Compromise.” These options will allow you to have an additional 60-120 days to pay the tax payment you owe. If you need a bit more time, the IRS also offers Form 4868. If you file this form by the original tax due date of April 15, you can receive an additional 6 months to pay your tax liability.
If you have already failed to make your payments on time and have been accruing a Late Payment Penalty, then you also have the option of filing an IRS Form 1040. This form provides you with the space to show a reasonable cause for not paying on time. If you can demonstrate that you had a good reason for not paying the taxes on time, the IRS may waive your penalty. Some excuses that might be considered would be evidence of poor health, family emergencies, or natural disasters that prevented you from making timely payments.
Here are some tips on late filing of taxes in this video from ehowfinance:
Failing to file a tax return and then paying the amount in full by the deadline can have serious repercussions for citizens, ranging from losing tax credits to potentially facing federal prosecution. The people who do not fulfill their tax duties also end up costing the federal government billions of dollars each year, which potentially impacts all citizens. Those who need to file a late tax return should follow the advice here to submit their payments, taking advantage of any applicable waivers and forms, as quickly as possible to minimize the additional financial penalties.
Have you filed for late tax returns? Please share with us your experience by leaving your comments below.
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