It’s just natural to experience anxiety as soon as the tax season opens. The stress and anxiety have a lot to do with the underlying fear of owing money to the state, which can be incredibly overwhelming to the point of delaying or completely disregarding filing taxes.
Now, you might think that you are saving yourself some stress by avoiding the tax filing process, especially if you cannot pay right now; however, you should know that there are serious consequences and hefty fines that accompany not filing your taxes.
Read on to learn more!
The Penalty is Harsher for Late Filing
You must understand what happens if you dont file taxes, such as the fact that the penalty for filing taxes late is typically higher than not paying your taxes at all. You might be surprised to know that the IRS doesn’t really like delays. With that said, if you delay the filing, you can expect the charges to be 5% on top of the outstanding taxes that you owe.
To avoid penalties, you might want to file for a tax extension with TurboTax and get professional guidance with your entire tax filing process.
You Are Running Out of Time
The clock starts ticking right after the tax due date. Typically, the charge caps 25% of your outstanding taxes. If your tax return lands at the IRS more than two months after the due date, you can expect a higher penalty, such as 100% of the outstanding tax.
A Milder Penalty for Not Paying Taxes
Compared to filing late, the penalty for not paying your taxes at all after you have filed your taxes on time is essentially milder. As a matter of fact, the monthly percentage of your outstanding taxes is a mere 0.5%. Yes, you read it right! This is a tenfold difference. This aspect indicates that whenever you’re faced with a choice between non-payment and late filing, non-payment will always be less damaging to your finances, even when you’re unable to immediately settle your tax bill.
Avoid Harsh Interest and Penalties By Filing a Tax Return
If you are familiar with the CSED, you might already know that the IRS has a limit of ten years to collect your taxes. However, you should know that the clock doesn’t start ticking from the very moment you owe taxes. On the other hand, the clock starts ticking from the moment you file for a tax return. This aspect indicates that, without filing a tax return, you are making the mistake of providing the IRS with a never-expiring ticket to collect your outstanding taxes.
Without filing, the IRS will keep adding penalties and interest to your outstanding taxes as it sees fit. Ideally, you wouldn’t want to see the tax collectors at your door forever. It’s definitely in your best interest to file your tax returns, irrespective of whether you can pay the full amount or not.
Final Thoughts
If you are in a position where you cannot pay your taxes right now, we recommend filing your tax returns. This way, you can establish A finite. During this, the IRS will seek your tax debt. The worst you can do is to prolong the chase for the tax collectors, as it will lead to an accumulation of penalties and interest.
