Late Taxes: a Day Late and a Dollar Short?
Some of The Causes and Consequences of Late Taxes
When the tax return due date has passed, it’s time to consider the consequences for those who haven’t managed (or refused) to report or pay taxes on time. This post reviews some of the causes and consequences of late taxes.
Obviously, all of us understand the necessity of reporting income and paying taxes, yet no one is immune to the failure to file taxes promptly. It’s actually easy to avoid the headache of coping with the outcome of procrastination.
So, what does it mean “to file a tax return”? Broadly put, all you have to do is to fill out the IRS 1040 Form and submit it before Tax Day. However, there are several important details that should be considered.
Firstly, there are four variants of the 1040 Form: 1040, 1040A, 1040EZ and 1040X. Logically, Form 1040 is the most commonly-used form, as it can be filed by any individual subject to reporting taxes. 1040A and 1040EZ forms are designed to be used by individuals whose annual income does not exceed $100,000 and who take the standard deduction as opposed to itemizing deductions. After these major considerations, there are several more restrictions to consider when choosing which of the variants to file.
The 1040X is to be filled out only for making amendments to already submitted 1040,1040A or 1040EZ forms. If you won’t be able to pay taxes until after the due date, the most reasonable step is to file Form 4868 (Application for Automatic Extension of Time to File Individual Income Tax Return), which is also due by Tax Day.
Well, that’s clear, but what if it’s too late?
Let’s take a look at what happens if you fail to accomplish any of the above-mentioned alternatives.
The Internal Revenue Service will start by obligating you to pay a 5% penalty fee, imposed up to 5 months out, which you will be informed of in a mailed notice. When you receive the notice, the IRS will expect you to reach out to them within 30-60 days.
If you still refuse to put your income tax return straight, the outcome can be surprisingly vindictive: Your Social Security Benefits can be withdrawn, the IRS can impose a federal tax lien, freeze your bank accounts, ruin your credit score, seize your property, grant you a summons, declare you bankrupt, and worst of all, make you go to jail.
To say the least, none of these are pleasant experiences. Our piece of advice to avoid reaching any of these outcomes is to reach out to the IRS immediately and explain the cause of your late taxes. Ultimately, it’s in the interest of the IRS to work out a solution that helps you to meet your tax-paying obligations!