Every year, the IRS (Internal Revenue Service) sends out reminders regarding the deadline to file taxes through various channels. Tax issues and related problems can pile up quickly if you ignore this deadline or miss it.
There are several consequences for missing taxes because the IRS knows how much an individual has earned in a year even if they don’t report their income. Let’s take a look at some of the major consequences here.
Filing after 60 days of the tax deadline could result in potential penalties going up to 25 percent of the amount owed as your tax. Applying for an extension doesn’t extend the tax due date as well.
If the IRS suspects or identifies any fraudulent activity on an individual or a business’ end, they can increase the penalties up to 75 percent of the amount owed.
2. Criminal Charges
Failing to file your taxes within the due date is classified as a federal crime and is punishable by a misdemeanor or felony. If an individual or a business has missed the deadline intentionally to evade tax, they can be charged with criminal tax violation, which could result in jail time.
3. Loss of Entitlement to Refunds
When you file taxes on time, you’re entitled to some refunds. Claiming refunds policy usually applies for three years starting from the due date of filing. If you constantly miss deadlines and file late, you can lose your entitlement to unclaimed refunds or pay the penalty for it.
4. Tax Return Preparation by the IRS
The IRS receives information from third-party sources. They know how much an individual or business has earned in a particular year and can prepare your tax returns on your behalf. However, you or your business will miss out on credits, deductions, exemptions, and more.
Keeping in mind that the statute of tax collection and assessment starts only when a return is filed, the IRS can collect and assess your unpaid tax returns several years later.
Missing your tax deadline has dire consequences, so individuals and businesses should work with a professional beforehand to file their taxes promptly.
Nidhi Jain is a certified public accountant cpa in Bay Area. She runs her tax and accounting firm that helps individuals and business tax filing Bay Area. We also offer payroll, bookkeeping, and LLC formation for businesses.
Call us now for further details regarding our services.