Thursday, November 5, 2020

​File tax return

Whether or not you can afford to pay your tax liability, you are better off filing your tax returns timely. 

If you fail to file your Federal income tax return in a timely manner, you will be charged an additional 5% of the tax due per month for the first 5 months after the original due date the of the tax return. 

This equates to paying an additional 25% above the original tax liability due plus other significant penalties and interest on both the tax owed and penalties.You may ask “Why should I file if I cannot afford to pay?” Aside from the additional liability that continues to accrue by not having filed all of your returns, you are not in compliance. 

By definition, compliance requires that all tax returns, current and past be filed, that the taxpayer has paid current tax estimates and/or liabilities and that the taxpayer will continue to do so going forward. The IRS and most State taxing agencies will not negotiate with a taxpayer who is not in compliance. It is easier to pay someone to prepare and file a tax return each year rather than paying someone a much larger sum of money to prepare tax returns for multiple years all at one time. 

In the latter, the taxpayer is usually scrambling to gather information that is now several years old and to add additional stress, many taxpayers are required to prepare and file returns while their funds which were most likely limited to begin with, are now tied up due to a bank levy or wage garnishment. If you missed the boat to file your tax returns timely, file them as soon as possible. Contact the Taxing Agency (before they contact you) Whether you owe the IRS or your local State taxing agency, it makes sense to make contact sooner than later. Aside from the stress of not knowing what they expect from you, you face the threat of collection activity. Once a taxpayer becomes delinquent, they will receive several notices increasing in degree of seriousness. If a taxpayer continues to ignore these series of notices, they will surely encounter one of two types of collection.

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