What happens when taxes are filed late?
Although it may be tempting to evade tax payments, it is not advisable to do so. The IRS (Internal Revenue Service) takes action against tax-evaders. The interest and penalties on the outstanding amounts will accrue over time when taxes are not paid by the due date. Even though most people are aware of these facts, there may be situations when they file their taxes late or do not pay them at all. Hence, it is imperative to know the consequences of not filing taxes. Accurate Tax & Bookkeeping enlists the same below:
1. Failure to file penalty
If the tax return has not been filed by the deadline, the IRS can impose a penalty. This is the “failure to file penalty”. This penalty depends upon the amount of unpaid taxes and also on how long the filing of taxes has been delayed.
2. Late Payment Penalty
This is the penalty a taxpayer incurs for not paying the total tax amount owed by the due date.
3. Lost Tax Refunds
Taxpayers must file tax returns within three years of the deadline. If not, they generally will forfeit any refund the IRS owes them.
4. Statute of limitations
The IRS generally has the power to audit the tax returns filed by a taxpayer within the last 3 years. This period can be longer under certain circumstances. This is called the “statute of limitations”. If the IRS suspects that the taxable income filed has been understated, an audit can be conducted, which may lead to further penalties and legal actions.
5. Penalty abatement
Penalty abatement refers to the process of removing penalties for the taxpayers. This is done when the taxpayer has made a mistake while filing the tax or has faced an uncommon circumstance such as a natural disaster, serious illness, or death of a family member. The IRS may also waive the penalty if the taxpayer pays taxes on time, has filed all tax returns, and has no prior penalties within the last 3 years.
6. Pay in installments
A taxpayer can set up an IRS installment agreement which gives them up to six years to pay their tax liability.
If a large amount of time passes since the tax deadline and it has not been paid, the IRS could potentially seize a portion of the taxpayer’s wages until the amount owed is settled. Also, the IRS may file a return on the taxpayer’s behalf. This is called “substitute for return” (SFR). SFR can end up being larger than the original tax amount to be paid.
Having said all this, the bottom line is paying taxes on time is the best way to maintain a healthy financial record. A good tax preparer can provide the necessary advice and guidance in this regard.
Working closely with small businesses and individuals, Accurate Tax & Bookkeeping Services is a tax preparation and bookkeeping service company founded in 2010 by Greg J. Menia. The team has expertise in the fields of tax preparation and planning, accounting and bookkeeping, payroll, and IRS/State representation around Tampa, FL.
To contact Greg and the team at Accurate Tax & Bookkeeping Services today:
- Call (813) 655-9702 in Brandon, Florida.
- Or Email [email protected]
Or visit the offices at 710 Oakfield Dr. Suite 159, Brandon, FL 33511.