Taxes are a touchy subject and there are a number of people who knowingly or even unknowingly fail to comply, causing themselves hardship they never could have imagined. I recommend to always familiarize yourself with your state and federal tax laws, or see an accountant. Regardless, you should always make an effort to file your tax returns in a timely manner. If you fail to file your tax returns, you might end up paying fines. And for those of you who owe, it is always best to pay the money you owe to the IRS rather than try to avoid it. If you do not comply, you could be slapped with a tax levy, which will hurt your finances even more.
A tax levy is the authority that allows the IRS to seize property, bank accounts, and wages in an effort to force you to repay the money you owe them. Initially, you are served with a notice and requested to meet your tax obligations. If you fail to comply with the notice, the IRS will send you a final notice before embarking on a journey to force you to comply. The IRS expects you to respond to these notices and plan with them on your payment installments.
The IRS will give you a window of opportunity for you to contact them. It is a good idea to take up this opportunity to contact the agency and make payment arrangements. If you are unable to do it by yourself, you could hire an attorney to represent you or contact an accounting firm that may be able to help you get an extension granted.
Tax noncompliance falls under two categories: failure to file and failure to pay. Both are equally important and will have the IRS knocking at your door if you don’t follow deadlines. Whether filing as an individual or as a family company, tax compliance is very important.
Consequences of Not Being Up-to-Date on Taxes
It is very important to be up-to-date on taxes. It is your responsibility to keep your information up to date and file by the deadline. You are expected to voluntarily report as well as remit earned income as well as accruing taxes to the government.
With the motivation the government has to seal fraud loopholes, as well as recover funds, it is difficult to get away with noncompliance with the tax laws. You may feel like there are millions of other people the government could focus on, but they could catch that one minor loophole you didn’t think was a big deal. You stand to pay twice the amount you owe after defaulting your tax obligations. As if that’s not enough, you could be sued and face other penalties that could result in huge fines and a prison sentence. It’s not worth it.
Apart from failing to service your tax dues, failing to file returns on time is also penalized. Misrepresentation of your income report also attracts huge penalties. Failure to file returns on time alone could cause a 25% fine.
Organize and Prepare Your Financial Records
To be best prepared for tax time, it is important to keep your financial records and organize your financial paperwork. Clear records will enable you to respond explicitly to any question raised by the Internal Revenue Service regarding any item on your tax return. This is very important especially after the 2017 tax plan.
There are quite a number of ways you could organize your records. The most important thing to note though is the safety of the records as well as easy retrieval. You could take a general approach to record keeping, so that not only are you preparing for any tax audit, but also for any other eventuality.
While at it, make sure to designate a record-keeping location. This will give you an ample space to keep your records organized. Of course, filing materials will go a long way to ensure order in your filing system. You may want to have a backup for your taxes just in case you lose the main ones to any eventuality. A safe deposit box is instrumental in keeping your difficult-to-replace securities as well as documents. You should also be keen on what is important and what should go. Some documents or receipts will just take up space and are no longer necessary.
Consolidate your financial information and see to it that you create a list of debts, financial assets, and the like. This comes after you have created investment files and organized your records well.
Most importantly, keep an eye on the calendar and be aware of deadline dates. Knowing what is coming up in the next months could make a huge difference in your ability to file or pay on time.