Though certain low-income Americans are theoretically exempt from income tax filing, the IRS normally expects you to file one when your earnings are above certain levels.

The repercussions might be severe if you are required to submit an income tax return but do not. The IRS may levy fines and interest for each month you fail to file and pay your taxes.

But what’s the difference between failing to file and failing to pay your taxes for three years?

The difference between late filing and late payment is the costs you’ll have to pay. The amount of your penalty is determined by the amount of taxes owed and how late you submit your taxes. Let us investigate more.

Guide to Filing Taxes in the USA

While U.S. tax regulations might be confusing, there are services to assist you file. Here are some tips.

1. Gather Paperwork

You’ll need your W-2 from your work, 1099 papers for any income, and current bank statements to file your taxes. Before starting your tax return, gather all essential documents.

2. Check Filing Status

Your filing status affects your tax bill and standard deduction – single, married filing jointly, married filing separately, head of the home, and qualified widow(er) with a dependent child. Determine whether filing status applies to you by reviewing its criteria.

3. Calculate Taxes

After gathering the required documents and determining your filing status, you may calculate your taxes payable. You must utilize IRS tax tables to calculate your tax liability depending on income and filing status.

4. Pay Your Taxes

After calculating taxes, pay them. Online, via mail, or in person. Avoid fines and interest by paying taxes before April 15 of every year for the previous calendar year.

5. Ask for Assistance

There are several resources to assist you with your taxes. The IRS website provides tax-filing tools and information. If needed, see a tax expert like GJM & Co..

Penalties for Failing to File Taxes

You will be penalized if you owe taxes and fail to file on time. The typical penalty for each month of your late estimated tax return is 5% of the unpaid taxes. The IRS restricts the charge at a maximum tax penalty of 25%, ensuring that the amount does not continue to rise. If you file more than 60 days late, the minimum penalty is $435 or 100% of the unpaid income tax filing, whichever is smaller.

Penalties for Failing to Pay Taxes

While the payment penalty is much lower, you might still be liable for a large sum. The IRS will charge you 0.5% of your free tax USA bill, up to 25%, for each month you do not pay your taxes. Overdue taxes are also subject to interest (equivalent to the federal short-term rate of 7%).

Here’s what happens if you file for less than 3 years.

If you disregard your taxes for three years, you may face more than just fines. In addition to the fines above, the IRS may:

• Create a levy on your pay or bank account. Wages and other sources of income may be garnished as a consequence.
• File a notification of a federal tax lien, which may restrict your ability to get loans or utilize credit.
• File a lien on your property, which means they will have a say in any sale of your property or assets and will deduct any tax payments you owe from the profits.
• If you willfully fail to file your taxes, you will be charged with tax evasion. You might face penalties of up to $250,000 and, in difficult situations, prison time.
• Your passport will be revoked if you owe more than $50,000 in taxes.
• Take your tax return and use it to pay off debts.
• Non-filers may forfeit tax refunds. The IRS reports $1.5 billion in abandoned tax returns (average refund: $813).

After three years from your income tax return filing due date, you can’t receive a refund. You can’t utilize the refund or put it on your account. However, three years of unpaid taxes are easier to resolve than five or 10. Accounting will be easier, and you’ll owe less in fees and back taxes.

Failure-to-file penalties are 10 times those for failure-to-pay, even if you can’t pay your taxes in full and file early. And IRS payment options may surprise you.

You can apply online for a monthly payment plan with the federal government. Some taxpayers may settle debt via an installment plan or compromise. You may request a penalty abatement if you file or pay your taxes late or make a mistake.

Why Is It Important to File Your Tax Return As Soon As Possible?

There are several reasons to submit your US tax return early. It provides you with a jump start on your refund. The sooner you submit, the sooner the IRS will process and issue your refund. The IRS assesses tax and launches collection procedures. Because a new return has no credits or deductions, the IRS may overestimate your income tax filing.

Filing early avoids the rush. As April 15 approaches, tax offices get increasingly congested, and filing times lengthen. You may minimize worry and hassle by filing early.

Early filing reduces identity theft risk. If you wait until the last minute to file, identity thieves may have time to submit a fraudulent return in your name. By filing early, you may avoid this.

Consider filing early if you’re thinking about waiting to submit your tax return. Saves time, money, and worry.

Bottom Line

The federal government is pursuing people who have failed to pay their taxes in the United States. It has been an issue for years, and the government is now trying to tighten down on people who evade their income tax filing obligations. It is a wise decision by the government since it will assist in guaranteeing that everyone pays their fair amount.

If you want to gather more information regarding tax filing in the USA, visit GJM & Co. for tax filings. We will walk you through the key details and manage everything for you!

Should you have any queries or need consultation, Schedule a Call today or write to us at info@gjmco.in.