Your tax return will be sent to you by the I-T Department. Refunds will not be given to you. If you owe taxes to the government, the interest continues to accrue. If you owe the government taxes money, the interest keeps accruing until you pay. Penalties may also be imposed.
Every individual should contribute something to the nation. Taxes are a way to indirectly contribute our revenue to society which benefits you, your family and your community. When you are an earning member (exceptions apply), you must pay taxes according to your income.
Each time when we skip filing taxes, we are answerable to the tax collectors/officers. We must pay the tax every quarter if we run a small business. It is always better to file taxes earlier. If we don’t file the taxes, we must eventually submit a substitute return and face all the penalties covering the interests. It applies if you fail to pay the tax accidentally as well.
Tax Documents
Tax documents, such as 1099 forms generated by the client or vendors, are sent to your businesses by the IRS. The IRS department keeps all these forms with other tax forms of business documents. Suppose we need to file a tax return. In that case, the IRS department will provide you with proof and automatically generate taxable income, which sets up a red flag for your business.
Substitute Returns
If we don’t file taxes, the IRS department will take action by generating a return on your behalf. The IRS department may not favour your business credits, expenses and deductions, which might result in a higher tax burden. If we pay and receive substitute returns, the IRS department would substitute the return and then help file taxes on your own taxes by replacing the substitute. But the owner still owes the penalties and interest to the tax department.
Penalties and Interest
The two most common penalties we face during the skipping of taxes are the failure to notice the penalty and the failure to pay the penalty. According to the IRS department, if we fail to pay the tax, it is calculated as 5 % of our monthly taxes, which may exceed 25 % of our tax liability. Suppose the failure to pay the penalty is half 1% of the total tax liability. Then each month, it should be at most 25 % of the tax burden. If the same penalty is done in the same month, the failure of the penalty may be reduced by the failure to pay the penalty every month.
After two months of not filing taxes, the minimum penalty would be 100 % of the total tax. Besides, the IRS department may also increase the interest, which becomes a tax burden.
Collection Process
If the failure of taxes is late after the penalty, the collection process begins. Then the IRS department offers an instalment plan to pay all the penalties and interest that have been a tax burden over a specific period. We don’t set up an instalment plan or pay the bill within a particular time. In that case, the IRS department will start collecting and taking your money. The IRS department uses banks to levy garnishments and federal taxes against property and collect taxes on all you owe.
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Additional Consequences
We can only get a refund if we pay the tax returns. The government has ruled that we have three years to file all the tax returns and get a refund. If self-employed taxpayers fail to pay taxes, they will not get the necessary credits towards social security or disability benefits. The IRS department does not routinely prosecute an individual who fails to file the tax. If they are being honest in attempting, then they may rectify the situation soon. The taxpayers who continually fail to file the tax by not concerning the law might face criminal penalties. The longer you wait, the more serious the consequences will become
If the IRS department determines that you should file or pay all the tax returns, then we have to do it. Then there would be a hearing from them. You will later receive a notification letter from the IRS department requesting you to pay the tax, or you will be penalised for not filing taxes.
The IRS department may also create a return from you. If you are an employee, the IRS department may create a tax return showing all your wages. The IRS department does not know about any deductions or tax benefits we may deserve. They know only about your income unless we tell them about anything. If not, then you may pay penalties or a lot more tax returns.
Conclusion
As a result, get ready to face serious consequences if the IRS department fails to receive a response from you after they have contacted you. You will be alerted by the banks you are associated with. They may also put a lien against your properties and keenly observe all your wages. Indeed, your interests and penalties will get piled up. Prepare yourself for the worst if you fail to pay taxes.
Also, Read the following:
- What is An Income Tax Return (ITR)?
- How Do I Claim My Income Tax Refund?
- Filing ITR-1 with Rental Income
