Filing and paying your taxes is very important
If you don’t file or pay your taxes, you will have financial penalties that may cost you dear. The various penalties that can be applied include a fine for failure to file, failure to pay, and failure to declare and pay proper estimated tax.”
For example, if you fail to file, you will be hit with a penalty of 5% of the value of the unpaid tax that was supposed to be filed. This penalty will be applied every month or part of a month, up to 5 months after the return is late. After that the amount of the penalty increases.
If you make payment with a check which does not clear, you will be burdened with extra penalties, calculated by the revenue service, on the amount of the check.
Your Credit Report May be Negatively Impacted.
If you make no effort to make payments, and the amount of your unpaid taxes builds up, the federal government will be entitled to put a lien on any property you own. A lien is a hold on your property until the debt is settled. These are legal documents that are filed with the county government. Should you sell your property while the lien is still in force, the government will take what is owed, and you will only get what remains. This will go on your record, and you may experience difficulties financing another home in the future.
There might be issues with your financial life.
If you don’t pay your taxes, the government will eventually catch up with you and make enquiries about your back taxes. You may well be given an opportunity to collaborate with them and make a plan to pay back taxes. If you do not work with them, they may make a claim against your bank accounts, or acquire your wages. They also have the authority to confiscate your passport and your driver’s license. A good idea is to contact the revenue service before they contact you. It may put you in a better position to negotiate, as they will not forget about you – nor your unpaid taxes.
What if I am unable to pay my taxes?
You should still file a return, even if you can’t afford to pay your taxes. At the same time as you file your return, contact the revenue service and advise them that you are unable to pay at the moment. Put in a request for them to help you work out a payment plan. The revenue service is usually open to payment plans, but they are specific that you must stick to any payment arrangements, so make sure you agree to what you can afford.
You may also be in a position to make an offer and a request to pay part of the taxes that are due. This is known as a compromise offer, and before the request is considered, you will have to provide comprehensive financial statements in support of the compromise offer, showing why you are unable to pay the taxes in full.