When a person fails to file his tax return with the Internal Revenue Service (IRS), he faces a number of consequences that can significantly affect his financial and legal situation. The IRS is not an “evil” entity, it is just doing its job, which is to collect taxes to keep the federal state and its gears working properly, and it must ensure that the collection is fair, even, equitable, and progressive.
Every year comes the so-called “tax day”, which is April 15th. This year, that date falls on a business day, a Monday, so it will not be moved to any other dates as it has happened when it falls, for example, on a Saturday or a Sunday.
Consequences of Not Filing Your Tax Return on Time
The IRS has the power to impose penalties for each month in which the return is not filed. These penalties usually start at 5% of unpaid taxes and can increase up to 25% after several months of delay. In addition to penalties, interest accrues on unpaid taxes from the filing deadline to the time the debt is paid off. This can significantly increase the total amount owed.
The IRS also has the authority to seize the taxpayer’s assets, such as bank accounts, wages or property, as a measure to recover the tax debt. This is particularly painful because it will expose the individual and its family to a public shame: sometimes the seizure happens before some other people, and that could be socially painful.
Lack of tax compliance can have a negative impact on the individual’s credit history, which would make it difficult to obtain loans or credit cards in the future. Criminal charges are also a possibility, the worst of them all: In serious tax evasion situations, the IRS may file criminal charges against the taxpayer, which may result in criminal and financial penalties.
Advantages of Maintaining a Good Relationship with the IRS
To maintain a good relationship with the IRS and avoid possible negative consequences, correctly file your tax return within the established deadline (April 15th of every year, if you don’t request an extension), which helps to avoid penalties and interest. If it is not possible to pay the taxes in full on time, a payment plan may be requested to avoid additional penalties.
It’s advisable to keep accurate records of income and expenses to support the declaration and avoid problems in case of audits. Consulting with a tax professional is also recommended to receive specific guidance and avoid costly mistakes.
Complying with tax obligations and maintaining a good relationship with the IRS comes with multiple benefits. Among them is the possibility of avoiding penalties and additional interest, as well as obtaining tax refunds more quickly by filing the return on time.
Benefits such as payment plans for outstanding debts are also accessed and stress related to possible negative consequences is reduced. In summary, following these guidelines not only helps to avoid issues with the IRS, but also provides peace of mind and financial benefits to compliant taxpayers.