Taxes are utilized to benefit the whole citizenry. Tax collections support health care services, national defense budget, social services, and many more. To ensure a balance and continuous revenue, the federal government encourages taxpayers to responsibly pay in time. Otherwise, the law imposes penalties to all non- compliant individuals. To avoid tax problems with the Internal Revenue Service (IRS), it is highly recommended to file tax returns ahead of time.

Most of the citizens would probably undermine paying of taxes, failure to pay and its corresponding penalties. However, the government recognizes it as stealing from the national and local budget and so must be penalized by law. The deadline for filing income tax returns is on the 15th day of April. Failure to comply with payment means accumulation of debts to your account. The IRS begins to penalize you with interests and penalties on your unpaid taxes on April 16. Then your tax problems begin to amass.

Failure to File Penalty

Failure to file tax returns by the due date including extensions means that the individual must pay a failure-to-file penalty. The sanction is 5 percent of the unpaid tax for each month or part of a month that a return is overdue. The maximum penalty is 25 percent.

Failure to Pay Penalty

Unlike failure-to-file penalty, failure-to-pay penalty has no maximum charging limit. This penalty is calculated 0.5 percent for each month that the tax is not paid in full until respective balance is paid.

Penalty for Frivolous Return

When you file a return with inaccurate tax amount, you can be charged of $500. Some tax payers play tricks to interfere with the income tax laws. However, once proven guilty of filing frivolous return, this penalty can add up to other penalties provided by law. Accuracy-related issue, negligence, disregard, and substantial understatement of income tax are also penalized by income tax law.

Tax Avoidance and Tax Evasion

Tax avoidance is a \”legal\” strategy to modify financial capabilities in order to apply deductions and exemptions provided by tax laws. For example, individuals can invest a huge amount of money in municipal bonds since interests from these bonds are not considered taxable income, or individuals may shift their assets to their children to avoid paying taxes. On the other hand, tax evasion is defined as an illegal strategy to avoid paying due taxes by erroneously declaring taxable income. This is a criminal offense sanctioned by state and federal laws. Tax evasion issues are generally rampant among other offenses regarding tax problems.

To avoid accumulation of charges and penalties, file your income tax return on time. Serious tax problems could get in your way otherwise. The more time that have elapsed from the due date onwards, the greater the amount that is charged to you. Consequently, if taxes are left unpaid the IRS can take charge of your account such as mortgaging any of your assets or getting a loan. The IRS can even coerce to enforce collection actions such as taking your assets or levying your income. To help you with your state and federal financial issues, consult a tax attorney. Tax problems are bothersome and require a legal expert to fix the crucial discrepancies from your account. You don\’t want an exchange blows with the IRS, do you?

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Category: Legal
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