It’s easy to put off filing your taxes. Life is jam packed with places to be and things to do. Finding time to organize your tax information and complete your return may seem hard.
If you’re like many people, it’s not terribly hard to find reasons to procrastinate all kinds of things you need to do, including filing your taxes.
If you wait too long and miss the April deadline, you may wonder if you should just skip filing altogether. We’ve all heard about someone who doesn’t file – ever. They go years without reporting income or filing a tax return, and they get away with it. If they can do it, why can’t you?
In this case, late really is better than never and filing, even if it’s past the deadline, is the best course of action. Here’s a closer look at why you shouldn’t simply choose to opt out.
What Happens If You Don’t File Taxes
If you don’t file your taxes with the IRS by the deadline there can be several tax penalties which will cause you to have to pay even more money to the government. So even if you can’t pay the full amount at once you should still file your taxes on time.
You can also file an extension which allows you some extra time to figure out your taxes. Below are five reasons why you should file your taxes.
1) Harder Than Ever To Get Away Without Paying Taxes
The IRS may be large and sometimes slow, but the agency has one thing on its side: information. An incredible amount of information is fed into IRS computers every year, and there’s a good chance some of that information concerns you.
For example, each year, your employer sends a copy of your Form W-2 to the IRS. The agency then waits, expecting a tax return from you based on your wages indicated on that W-2.
In addition, banks, investment companies and businesses send Form 1099 to the IRS to report various types of income you received throughout the year. If you sell real estate, the IRS receives a form showing how much you received from the sale.
It may take the IRS some time to match your income up with your tax return, but eventually they will. If you didn’t file your return, they’ll figure that out too.
2) Falling Behind On Your Taxes Creates Unnecessary Stress
Getting behind on any bill is stressful. Falling behind on filing your tax return(s) and paying your tax bill(s) can feel even worse. Fortunately, its stress you can avoid.
With TaxAct, you can file your return before it’s due and feel confident the program has helped you find all possible deductions and tax benefits. And later, if you believe you may have missed something, you can always amend your return. Just remember you’re better off filing before the deadline so you can avoid paying penalties and interest that may come with filing late.
3) The Longer You Wait, The More Serious The Consequences
Once the IRS determines you should have filed a return and didn’t, you’ll start hearing from them. You’ll likely receive a notification letter from the IRS stating you will be penalized for not filing a return.
The IRS may also create a return for you. For example, if your employer reported wages, the IRS may create a tax return showing those wages. The catch? The IRS doesn’t know about any deductions or other tax benefits you may deserve. They typically only know about your income, and unless you straighten things out, you could end up paying a lot more in taxes than you should.
If the IRS doesn’t hear from you once you’ve been contacted, things can get more serious. Your bank may send you a notice indicating your money has been seized by the IRS. The agency may also put a lien against your property or garnish your wages. And, during all this time, interest and penalties are piling up, meaning the IRS can take more of your money.
4) What If You Don’t Owe? You Might Have A Refund
The IRS has strict guidelines in place indicating who needs to file a tax return. If your income falls at or above the minimum income requirement, you’ll need to file even if you think you won’t owe anything or receive a refund. You have three years from your filing deadline to file for a refund.
But, there’s more. Thanks to certain credits, such as the Earned Income Tax Credit, you may be entitled to a refund even if you aren’t required to file. In this case, you won’t get the refund if you don’t submit a return, therefore it may be in your best interest to do so.
5) Better To File Now, Even If You Can’t Pay
Some people avoid filing because they can’t afford to pay the tax bill. However, you should always file on time, even if you can’t pay all of the taxes due. If you wait, you’ll be faced with a late filing penalty– which is just one more thing you’ll have to pay. The failure-to-file penalty is 5 percent per month based on the amount of tax you owe.
If you are unable to pay your tax bill quickly, the IRS has payment installment plans. Approval of an installment plan is automatic if you owe $25,000 or less, can prove you cannot pay the total amount you owe at the time it’s due and are able to pay off the tax in three years or less. In addition, you or your spouse can’t have had an installment agreement with the IRS in the past five years.