The income tax system in the United States of America requires that employed individuals, businesses and anyone receiving income file annual tax returns This annual tax return filing process allows someone to evaluate what they have already paid toward their taxes and cover the difference or potentially receive a refund.
The tax season is stressful for many people. They have to pay for tax software or professional preparation. They may owe money in taxes as well. Some people put off filing their tax returns or just decide not to do it. What are the possible penalties for those who do not file their annual tax return by the annual April 15th deadline, if they haven’t received an extension?
The IRS assesses a penalty
Anytime a taxpayer fails to pay their income taxes in full and on time, they can expect the Internal Revenue Service (IRS) to demand payments for the past-due amount and to impose penalties on top of the original amount that someone owes.
The penalty for not filing a tax return can become quite steep. In addition to requiring payment on the unpaid amount, the IRS can impose a 5% fee for every month that someone fails to file their return. Thankfully, the cap for that penalty is 25% of the amount owed. If you technically have a refund coming, the IRS will not impose a penalty, but you will not see the funds that you deserve for your overpayment of taxes.
Failing to file has secondary risks
Someone who has numerous questionable marks in their tax history could be at increased risk of an audit in the future. The IRS recently received billions in new funding from the government, which could potentially mean thousands of additional agents seeking to enforce the Tax Code.
Those with a history of inaccurate returns or failing to file tax returns might be at increased risk of an audit in the future. Anyone who receives notice from the IRS that they have failed to submit paperwork or to pay their taxes in full may have reason to worry about audits or criminal charges.
Both tax fraud and tax evasion could lead to large financial penalties and jail time. Getting help when dealing with income tax controversies can help protect someone’s finances and freedom from the possibility of criminal charges.