Are you so worried about owing the IRS money that you’re debating not filing your tax return? While you might think that will bring you some relief, the truth is that missing the filing deadline can have serious financial consequences. If your goal is to reduce your tax burden, you should file your tax return on time and then try to work with the IRS to determine an alternative payment arrangement for any tax balance you owe.
Know the Consequences
When taxpayers do not file their taxes on time, the IRS has the right to assess certain penalties. The two penalties you may have to pay are the failure-to-file penalty and the failure-to-pay penalty. Usually, the failure-to-file penalty will be greater than the failure-to-pay penalty. Failing to file will result in a charge of 5% of your unpaid taxes for each month, or part of the month, you are late. However, it is important to note that this penalty will not exceed more than 25% of your unpaid tax bill. On the other hand, failing to pay what you owe on time will result in a penalty of 0.5% of your unpaid taxes for each month, or part of the month, you do not pay what you owe. As you can see, these costs can quickly add up. As a result, you’re generally better of filing your return even if you can’t pay what you owe at that time, simply to avoid the failure-to-file penalty.
Have questions? Turn to the pros at Taxation Solutions, Inc. Our tax relief team can help you prepare your returns on time so you don’t have to deal with failure-to-file penalties. Call us right away to learn more!