The tax deadline was a few months ago, but what if you missed the April 15th deadline? The most important action you can take at this point is to file as soon as possible. The IRS is already tallying up interest and penalties on the amount you owe and these fees add up fast. The longer you put off filing, the more penalties you will accrue if you owe taxes. Additionally, many people don’t realize that failing to file a tax return is a felony. In other words criminal charges may be filed against you!
The penalty for filing late is approximately 5% of the unpaid taxes you owe for each month (or part of the month) the tax return is late, up to a maximum penalty of 25%. So if you owe $10,000 your first penalty for the month is $500. Not only is there a penalty for failing to file, there is an additional penalty for failing to pay. This penalty is one half of one percent of the unpaid taxes. Similar to the failure to file penalty, this penalty cannot exceed 25% of the net amount of taxes due. Most of my clients are shocked when they learn about the severity of these penalties.
I also want to clarify extensions- what they are and what they aren’t. A lot of people think that an “extension” allows you more time to pay your tax bill. This is NOT true. An extension merely affords you more time to file your return. If you owe taxes that amount is still due April 15th. If you are going to owe money and you file an extension, you also need to send the estimated amount that you will owe in with the extension. For instance if you think you are going to owe $10,000, it was still due April 15th. The extension deadline is October 15th to file.
What if you haven’t filed with the IRS for a couple years? The first priority we face is to get you caught up on your filings. Once we complete that and know the total amount you owe including interest and penalties, I may be able to negotiate with the IRS and get you set up with a payment plan, or we may get an Offer In Compromise in which the IRS agrees to settle for an amount less than what you owe. I handle those negotiations with the IRS for you. It is best for a tax professional to handle these situations because we know how to talk to the IRS. The taxpayer may say things that might not be in their best interest.
On occasion, the IRS will file a tax return on your behalf if you haven’t done so. This is not in your best interest either. They are trying to get you into compliance with the tax code, but usually you end up owing much more than if you filed on your own. The IRS doesn’t itemize any deductions and they use the highest possible tax rate. Letting the IRS file for you is not a good thing to do; you’re just hurting yourself.
The IRS might send a notice if you haven’t filed for some time. If you don’t respond to the first notice, the notices will start coming more often and they’ll start getting more aggressive. If you fail to respond to the notices, eventually you will get a notice that warns you that a levy will be placed on your bank account or your wages because you haven’t paid any attention to previous notices. If it gets to the point where the IRS is threatening to levy bank accounts and wages, they will be aggressive and fairly difficult to deal with. They have already decided you are not willing to cooperate.
If you are in good standing with the IRS or at least working towards getting into compliance, it is wise to begin preparing for 2013 tax time. Check your withholding. Adjust your withholding to have more taxes taken out of your paycheck if you are employed. If self-employed it is best to budget estimated tax payments. Set the money aside throughout the year. It is difficult to part with this money when you run a small business, but you will be much happier and more prepared come April 15th. Also it is helpful to keep detailed records, mileage logs, charity receipts, etc. If you get audited you will wish you had detailed records.
I am here to help you with your tax problems whether you are late in filing, late in paying, or receiving threats from the IRS. I can help you get into compliance and plan for a bright future that is free of IRS problems. Call today and let’s begin working toward resolution together. Call 312-664-6649 and visit http://chicagotaxteam.com/.