Finance

WHAT HAPPENS IF YOU FILE YOUR TAXES LATE?

INTRODUCTION

A tax is a financial levy by any government in force or statutory bodies to collect revenue to provide better services for a country’s citizens. Taxes are of two types—direct and indirect tax. The burden of the tax which falls directly on the assessee is known as direct tax, and the burden of tax which falls indirectly on the consumer is known as indirect tax. Direct taxes are progressive, whereas indirect taxes are regressive. To ensure compliance and accuracy, individuals and businesses must carefully file taxes each year, whether they are subject to direct or indirect tax, to meet their tax obligations and avoid penalties.

However, there are certain due dates for filing your tax returns. If there is any delay in filing the above tax returns, penalties will be levied respectively. A good financial manager can assist you in reducing the overall tax liability. If by any chance the due dates are missed, there are still extensions available for filing the tax returns. However, in certain exceptional circumstances, late filing of tax returns will not result in a penalty. The following circumstances are as follows;

1] The Indian Revenue Service is in arrears for a refund.

2] The citizen stays outside the country for their employment or in an allied declared catastrophe area.

PENALTIES FOR FILING LATE TAXES AND FAILING TO PAY:

The Indian Revenue Service charges penalties in the following ways;

-5% for failure to pay the due amount, 0.5% for failure to pay penalties, and 8% of annual interest which compounds on a daily basis.

HOW DOES THE IRS COLLECT PAYMENTS?

The IRS has various ways of collecting taxes if you are not regularly filing or don’t revert to letters. For such purpose it can take the following steps;

1] Voluntary Payment: If the person is filing a late return, then the best possible option for him will be reverting to the instructions given by the IRS and paying accordingly. It will reduce your fees to a great extent.

2] Offers in Compromise (OIC): It is an offer that allows the assessee to settle your tax liability for less than the actual amount to be paid. To be an eligible person for compromise you can visit the OIC Pre-Qualifier on the IRS website.

3] Filing a Tax Lien: A tax lien is a legal right of the government to impose over your property when you show unwillingness to pay tax or fail to pay tax liability.

4] Asset Seizure: If there are no replies to the government correspondence repeatedly, then the government will start imposing on your asset after giving you a final notice prior to 30 days.

CONCLUSION:

A financial planner will assist you in strategizing your timely tax payments. The main drawback of late tax filing would be financial consequences which will attract penalties and interest. The IRS is also being tolerant of taxpayers who cannot pay the entire tax liability, by allowing them to pay in installments. If the taxpayers are in regular with their tax return, then they don’t have to pay any penalties or interest.