It is nearing the end of April, almost two weeks after federal and state income tax returns were due on April 15. Hopefully, that means you have filed your income tax and paid any taxes you owed, or perhaps you are now waiting on a refund
But what if you have not filed your income tax for 2012 and you did not bother to file an extension? Should you just sit back and wait for the IRS to contact you? Read on to learn more.
Tax Penalties and Interest
It probably goes without saying, but the IRS wants their money, that is the taxes you owe. While in extreme cases of tax evasion the IRS will seek to place offenders in jail, this is the exception rather than the norm (because those in jail cannot earn sufficient money to repay the IRS). Often those placed in jail for tax evasion are celebrities whose name recognition is intended to communicate to the general public that no one is above the law when it comes to taxes and thereby generate compliance with following the tax laws.
Therefore, when you do not file your tax return or pay the tax liability you owe, the IRS makes it painful through the charging of penalties and interest:
- The Failure to File Penalty is the most expensive penalty, which is charged when you fail to file your tax return on time. The IRS applies this penalty at the rate of 5% of the tax liability you should have paid per month until you file your tax reutrn, up to a maximum of 25% of the tax liability.
- The Failure to Pay Penalty is charged based on the amount of tax liability that is unpaid. The IRS applies this penalty at the rate of .5% of the tax liability you should have paid per month until you pay your tax liability in full.
- Interest is also charged at the rate of 3% per year on any unpaid tax liability until you pay your tax liability in full.
Because of these penalties and interest, it is in your best interest to file your tax return sooner rather than later, even if you cannot afford to pay the tax you owe. At a minimum, filing now will stop the incurring of great penalties under the Failure to File Penalty.
If you file, owe taxes, and cannot afford to pay what you owe, the IRS has an installment plan and other options to help you pay what you owe over time. But any payment you are able to make will reduce the Failure to Pay Penalty and any interest charges.
Speaking with a Tax Attorney
Every tax situation is a bit different even though we are all living under the same tax laws. Therefore, if you need specific help with your tax return or questions, you can get that help by calling the phone number located at the top of this page. A tax attorney who knows the tax laws of your state will get in touch with you. The first conversation is free of charge, but anything you discuss with the attorney is completely confidential.
Therefore, please make the call today to get the help you need to file your tax return.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.