Death and taxes are the two inevitable events in life. Although this is common knowledge, many Americans still assume the risk of not filing their tax returns and paying their taxes on time. Whether the reason may be- a death in the family, divorce, illness, or destruction of financial records in a natural disaster- delinquency in the payment of taxes carries serious consequences.
By paying their taxes in a timely manner, taxpayers will owe less in interest and penalties. This is because the IRS imposes two penalties, one for non-filing of tax returns and another for non-payment of taxes by the 15th of April. For instance, individuals who request an extension but fail to enclose payment for their taxes with the extension request will only avoid the failure to file penalty. They will still face the failure to pay penalty. Similarly, taxpayers eligible for an installment agreement will not be excused from the late payment penalty. Moreover, they will have to pay an additional user fee costing them as much as $105.
Taxpayers who fail to file their tax returns and/or who pay late are bound to feel the heat, financially-speaking. The penalty and interest charges that result from filing past the deadline date typically range from 5% per month to 25% of the tax amount owed and reflected on the tax return. The penalty slapped on taxpayers who fail to pay their taxes on time ranges from 1/2 of 1 percent of the tax due every month to 25% of the tax amount due. The joint penalty for non-filing and non-payment of taxes by the deadline can amount to 47.5% (25% late payment and 22.5% late filing charges) of their tax bill. Daily accumulating interest is also added to the unpaid tax beginning from the return's due date and extending all the way to the date of payment. Various levels of taxable income carry different tax rates. Therefore, to improve their financial health, taxpayers should strive to reduce their taxable income.
Taxpayers may either paper file or e-file their taxes, the latter being the most expeditious mode of submission. E-filing may be performed via such tax software programs as H&R Block and Turbo Tax. Taxpayers may pay their taxes online or by telephone- with a credit card. They may obtain the necessary funds to pay off IRS taxes from one of many sources, including:
To reduce the amount of penalties and interest owed, it is unequivocally in a taxpayer’s best interest to pay as much as possible by the due date. They should then immediately visit or contact their local IRS office to explain their tax predicament and obtain assistance with regards to their overdue tax bill. A free income tax service is available through the IRS and accessible in person and by fax, telephone or computer. The IRS provides answers to a whole array of tax questions and helps taxpayers obtain publications and forms. The agency also sponsors volunteer assistance programs and offers guidance to taxpayers at numerous locations nationwide. One such program is the Volunteer Income Tax Assistance Program (VITA), in which trained volunteers gratuitously assist eligible applicants with their taxes. By visiting one of VITA's conveniently-located sites, qualifying individuals (those with incomes of $38,000 or less) benefit from free tax return preparation and free e-filing. A second program aimed at providing tax preparation at no cost to taxpayers who are 60 years and older and with a low to medium income is Tax Counseling for the Elderly (TCE). Eligible taxpayers may meet with a TCE counselor at one of a number of conveniently-situated locations. Businesses (i.e. filing Schedules E and C) as well as joint filers and individuals, with an income exceeding VITA's criteria, should enlist the help of a tax specialist for their tax return preparation. For a nationwide listing of companies that take part in the IRS e-file program, taxpayers may consult the "Authorized IRS e-file Provider" database.