Why is Tax Payment on Time Necessary?
Paying taxes on time makes you a responsible citizen. But in today’s fast-growing world, it becomes difficult for people to file taxes on their own, on time. Although it only takes a few minutes to file your taxes, sometimes it’s just not possible to manage time and you need to keep in mind that there is a penalty for not filing taxes. But it will not be an issue with FlyFin that operates in and around the US. Their expert members can help you solve all your tax issues. Besides paying taxes on time, they also consult about other tax-related problems for which you might have to face consequences at a later stage.
Timely tax payment is most crucial for both individuals and societies. It funds essential services, promotes fairness, and maintains social stability. It also ensures steady government revenue for education, healthcare, and public programs. They also foster trust, compliance, and a sense of collective responsibility, building a prosperous society. As an instance, compliance with sales tax regulations is crucial for businesses operating in Colorado and other states, as it helps maintain a fair and level playing field. Ensuring timely payment of taxes, such as Colorado sales tax compliance, holds significant importance across different states.
What is the basic penalty for not filing taxes?
There are two different kinds of penalty fee that can be charged, namely failure-to-file penalty and failure-to-pay penalty. Let us understand both the terms in brief-
Failure-to-file-Penalty –
As the name suggests, failure-to-file-penalty stands for not filing taxes on time. It is not only about filing your taxes on time, but it also about the penalty fees that will depend on how late you filed your taxes, also adding interest charged on these fees. The penalty fee is mentioned below:
* 5% of the tax amount that you owe for every month or a partial payment that includes a part of a month for which the return is late, is usually charged under the failure-to -file penalty. The maximum penalty won’t exceed 25% of the tax that you owe to the department.
* If both penalties fall under a same month, then failure-to-pay penalty for that month becomes higher and failure-to-file penalty automatically gets reduced. A combined penalty of 5% for each month will be charged on the taxpayer.
* Even after 5 months, you haven’t paid, the failure-to-file penalty will max out, but the failure-to-pay penalty will continue to rule, until the tax is paid partially, up to its maximum of 25% of the unpaid tax.
* The least penalty for not filing taxes is $435 or the amount of tax that you owe, whichever is less, if your return is due more than 60 days.
Use this widget to calculate quarterly tax:
Failure-to-pay penalty:
It was mentioned above and this is a charge that the IRS applies when you haven’t paid the tax owed, even if you have filed your tax returns by the correct date. Two different calculations will be applied on this penalty. One is when you deliberately don’t pay the amount shown as tax owed on your return sheet and the second one is if you owe any tax that you didn’t report on your return sheet. The basic calculations are pretty much the same apart from-
* The failure-to-pay penalty gets reduced by 0.25% per month if you have filed your tax return on time, during your approved payment plan.
* If you haven’t paid the tax even after getting a legal notice from the department, within 10 days, then you have to pay 1% per month as failure-to-pay penalty.
Is there a way to avoid the penalty for not filing taxes?
If you have missed the tax-filing deadline, help yourself avoid the penalty for not filing taxes by getting an extension to file your tax return. Getting a tax extension can only help you to buy some extra time in order to file your tax return. This doesn’t mean you have to pay taxes. Always remember, a tax extension only gets you more time to file your tax return. People affected by natural disasters, certain members of the military or Americans living overseas, may automatically get more time to file.
Although there are some loopholes through which you can get saved from paying penalties. When you provide a reasonable explanation for filing late, you might get a chance to avoid a penalty. Also, you can get a chance to claim a tax refund within three years if you still haven’t filed a tax return. If your tax return results in a refund, there is usually no penalty for failure to file taxes.
Why is it not a good idea to avoid filing a tax return?
It’s a risky thought. While the US Government usually has just six years to charge you with criminal tax evasion, it has forever to collect the taxes you owe and assess penalties. Whenever you don’t file your taxes, you owe the Government money. If you fail to pay taxes on time, a heavy penalty and interest be levied upon you in no time! If you have old tax returns, it may not be a good idea to believe that the IRS has forgotten about you or your taxes. However, the case might get after 10 or 20 years later. So, it is always advised to pay taxes on time.
- Heavy penalty –
Each month that you fail to pay your taxes in full, it will result in the IRS assessing a penalty of 0.5% of the total tax that you owe. This will continue each month, maxing out at 25% of your total owed tax bill.
- Interest charge –
When you fail to pay a penalty, interest gets added on your unpaid taxes. To be a precise, a quite heavy interest!
- Lost refunds –
In most cases, the IRS gives you a three-year time period to file previous years’ returns. Once the time period ends, you lose your chance to claim for your tax refund.
Contribute towards your country by filing taxes on time –
Taxpayers should make sure to file their taxes within the due date to avoid adverse consequences and penalties for late filing of Income Tax Returns. Get in touch with FlyFin in order to file your taxes on time. They will not only help you with filing your taxes on time but will also set reminder for your next ITR date. It is hoped that this guide can be helpful for tax return filing.