Failing to file tax returns can cause serious problems in the long term. In some cases, it can be considered a criminal act punishable by a year in jail and a $10,000 fine for each return not filed. The longer a taxpayer delays dealing with back taxes, the more difficult the situation may be. It is best to hire back returns as soon as possible to avoid penalties, additional interest and bank levies. Below are several important reasons to file delinquent tax returns.
Possible Jail Time
Even if a person hasn’t filed taxes for one year, the return is still regarded as delinquent and the IRS may consider it a crime. Several high-profile cases have resulted in misdemeanor convictions and prison sentences, and the IRS goes after those who attempt to avoid taxes. The agency is becoming more aggressive in its pursuit of non-filers, and it makes no sense to lose freedom over a forgotten tax return.
In today’s poor economy, many choose not to file because they can’t afford to pay what they owe. The best thing for someone to do in this situation is to file the return, pay what’s possible and set up a payment plan with the IRS so they remain compliant. Filers should consider filing delinquent returns ASAP to avoid IRS actions such as wage garnishments and bank account levies.
If a filer fails to pay their taxes, they may incur other penalties. Those who request a filing extension should consider that it doesn’t give them more time to pay what’s owed. To avoid penalties, taxpayers should submit returns by the appropriate time, even if they can’t pay what’s due. There may be a “failure to pay” assessment, but it will be less than the penalty for a missed filing. It’s best to work with a tax expert with bc tax llc to negotiate a settlement.
Higher Tax Bills
The Internal Revenue Service may prepare a substitute return for a delinquent taxpayer, where the filer won’t be able to receive personalized exceptions and deductions. These returns are filed in the government’s best interest, and they subject filers to a bigger tax liability. It is important for taxpayers to file returns as soon as possible to save money while avoiding significant, long-lasting legal consequences.