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It can cost you for slacking off on filing your taxes.

IRS Tax penalties

We are human and as such, at some time “may” have been tempted to ignore filing taxes or to simply postpone the routine to the point that you owe the government years’ worth of tax returns. What would happen if I didn’t file my taxes this year? Is the government really going to come after me?

Experience has proven, you would benefit more filing your return in magic marker rather than simply ignoring when due — no matter how frightening the chore might be.

“Every once in a while, tax preparers will have a client that have valid life-threatening problems or something [that prevents them from filing their taxes]. There are innumerable situations in which a taxpayer might fail/pay their taxes.

Outlined below are a few common instances of what you can expect if you fell short this past tax filing season:

What if…

…It’s October 16 and you still haven’t filed your taxes, or your electronic filing was rejected:

If you don’t file your return to the government by the April and October deadlines, you’ll get hit with a failure-to-file penalty, which starts at 5% of however much you owe, maxing out at 25% of your tax bill. If you wait more than 60 days to file, you’re charged a $135 fee or 100% of the taxes you owe (whichever is less). On top of that, you’ll be charged a painful 3% daily compounding interest on the unpaid balance .There’s an exception here: If you’re owed a refund, you won’t be charged a late-filing fee at all. But you won’t get that refund unless you file a return, and you’ve only got three years to claim it before your refund winds up somewhere other than your hands.

What to do:  If there are extenuating factors that make it impossible for you to file on time, you can apply for an additional extension with the government. That can buy you additional “some additional time to file” but not to pay anything owed and must be done by the last day for extension filers tax deadline date.

You’ll may still face some consequences, but the government appreciates taxpayers who at least “communicate” and file their return(s), even if they can’t pay their whole bill. On-time filers pay a discounted late-payment fee of 0.25% per month so long as they have a payment agreement in place. But really, it’s the compounding 3% interest charges on unpaid tax bills that can do the most damage.

If you owe less than $50,000, you’re qualified to set up a payment plan with the government and should do as soon as possible. You might consider enlisting the help of a Tax Firm or Tax attorney for assist, especially if you’re more than a year behind.

There are situations when taxpayers simply can’t file their taxes and/ pay their bills and don’t qualify for payment assistance. In that case, the IRS will eventually levy a federal tax lien against you. In a worst-case scenario, the IRS can garnish your wages, bank accounts, Social Security benefits and even your retirement income to recoup unpaid taxes.

Taxpayers now have more time to challenge a levy

Taxpayers now have more time to challenge a levy

The IRS reminds individuals and businesses that they have additional time to file an administrative claim or bring a civil action for wrongful levy or seizure. Tax reform legislation enacted in December extended the time limit from nine months to two years.

Here are some facts about levies and the extension of time to file a claim or civil action:

  • An IRS levy permits the legal seizure and sale of property to satisfy a tax debt. For purposes of a levy, the term “property” includes wages, money in bank or other financial accounts, vehicles and real estate.
  • The timeframes apply when the IRS has already sold the property it levied. Taxpayers can make an administrative claim for return of their property within two years of the date of the levy.
  • If an administrative claim is made within the extended two-year period, the two-year period for bringing suit is extended for one of two periods, whichever is shorter:o Twelve months from the date the person filed the
    claim.
    o Six months from the date the IRS disallowed the
    claim.
  • The change in law applies to levies made before, on or after December 22, 2017, as long as the previous nine-month period hadn’t yet expired.
  • Anyone who receives an IRS bill titled, Final Notice of Intent to Levy and Notice of Your Right to A Hearing, should immediately contact the IRS. By doing so, a taxpayer may be able to make arrangements to pay the liability, instead of having the IRS proceed with the levy.

More Information:

  • What if I get a levy against one of my employees, vendors, customers or other third parties
  • What is a Levy?
  • Publication 4235, Collection Advisory Group Numbers and Addresses
  • Publication 4528, Making an Administrative Wrongful Levy Claim Under Internal Revenue Code Section 6343(b)
  • Publication 1660, Collection Appeal Rights
  • Publication 1, Your Rights as a Taxpayer

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