The statistics released by the Internal Revenue Service (IRS) show that the average tax refund increased by 3.3% for the 2024 tax season, going from $2,852 to $2,945 by the week ending April 25.
Tax returns, payments, and penalties are interconnected in a very complicated manner, and you should take into account several critical factors that are involved. The IRS has particular requirements and deadlines that could affect your financial obligations.
How does the IRS work? The IRS has a system in place that guarantees the collection of taxes according to the law. Besides, it has also given the taxpayers an avenue to resolve their issues, get back their money, and keep up with the federal tax laws.
What will the IRS do if you miss the deadline or pay less than you owe? Let’s learn more below!
Understanding the Tax Return Process
It is not only important to understand the process of filing your tax return but also to make everything go smoothly. Get ready with all the required papers, like W-2s and 1099s, so you will have them all on hand.
Next up is the decision of whether to file online or via snail mail. Both methods have their advantages and disadvantages, but normally, online filing is the quickest way. Complete the forms correctly. Reviewing your calculations can prevent you from experiencing some agony and anxiety thereafter.
Account for your credits and deductions when computing your tax. Don’t forget to keep a copy of your tax return after it has been filed for your personal record.
It will become less frightening to go through once you know the procedure.
Payment Options and Deadlines
Tax payment methods and due dates can be tricky to handle, but once you know them, they will be much easier to manage. Various payment options are available from the IRS, including direct debit, credit or debit card payments, and even payment plans.
The traditional method of paying by check or money order is always an option. Dates are very important so for the majority of taxpayers, mark April 15th on your calendar.
If you need more time, you can apply for an extension. An extension will be granted for filing only, not for payment. Being aware of these alternatives gives you a feeling of power and it prevents you from being stressed out while performing your tax obligations.
Common Penalties for Late Filings and Underpayments
Penalties for missing payment deadlines can be really heavy, and every taxpayer should take this fact into consideration. You may receive a graduated scale of the taxes you owe if you fail to file a required state tax return within the appropriate time limit, according to tax litigation lawyer Ken R. Ashworth. The IRS imposes a penalty of 5% for unpaid taxes for each month, up to 25% at most.
Interest is charged on taxes owed and an additional penalty of 0.5% per month is imposed in case of underpayment by the IRS, which can pile up very fast.
Continuously informing yourself and maintaining the deadlines will help you dodge penalties. Being proactive and organizing your tax documents will keep these kinds of occurrences from happening.
Dealing with IRS Audits and Reviews
Audits may seem scary, but being aware of the process can actually ease anxiety. The IRS performs audits to control and verify the accuracy of tax returns. If you are selected for an audit, it does not automatically mean that you are conducting fraud. These audits are simply part of the agency’s standard procedure. A letter from the IRS will indicate the documents you need to provide.
Properly organize the documents and provide answers for every question instantly. Communication is important. If you have any doubt, ask for clarification.
You will be able to follow things at your audit effortlessly as long as you try to keep yourself cool during the moment.
Tips for Effective Tax Filing and Payment Management
Maintaining organization is important for managing taxes and maintaining smooth payment processing. First of all, create a separate folder for your tax documents regardless of whether they are issued in paper or electronic form.
Avoid procrastinating when searching for the required receipts or forms. Set a timeline for when you will collect your information and be strict with it. It would also be smart to use digital tools and apps for the tracking of expenses and deadlines.
Review your returns for correctness before submission. A payment schedule could be arranged to help you clear your tax dues.
Do not hesitate to ask a tax pro or reach out to resources within your community. Their assistance can be quite beneficial and very encouraging.
