Thursday, 13 March 2014

Why Should I File My Tax Return as Soon as Possible?

Why Should I File My Tax Return as Soon as Possible?

There are two advantages to filing as soon as possible:

Generally, if a taxpayer is due a refund for withholding or estimated taxes paid, it must be claimed within 3 years of the return due date or risk losing the right to it. The same rule applies to a right to claim a tax credit such as the Earned Income Credit (EIC).Self-employed persons who do not file a return will not receive credits toward Social Security retirement or disability benefits. Failure to file results in not reporting any self-employment income to the Social Security Administration.Back To Top

What If I Owe More Than I Can Pay?

Even if a taxpayer doesn't have enough money to pay, returns should be filed to avoid further penalties for failure to file. The IRS will assist in finding a solution to the problem.

The IRS has streamlined its policies to offer alternative account resolutions if a taxpayer cannot pay in full with the return:

The IRS will help to set up an installment agreement when the situation warrants. Installment payments allow taxpayers to pay the tax debt over time.The IRS will consider whether an offer in compromise is an appropriate solution.

What If I Don't File Voluntarily?

The IRS is taking enforcement steps for those who repeatedly choose not to comply with the law. IRS employees will prepare returns when taxpayers do not file. The returns prepared by the IRS might not give credit for deductions and exemptions a taxpayer may be entitled to receive. Bills will be sent to those taxpayers for the tax due, plus penalties and interest.

People who repeatedly don't comply with the law are subject to additional enforcement measures.

How Can I Avoid Owing Money on Next Year's Return?

Many people don't file tax returns because they don't have enough money to pay the tax they owe. They find out after completing their return that their withholding or Estimated Tax payments do not equal their tax liability.To help avoid this situation, the IRS can advise taxpayers how to ask an employer to withhold enough tax from their pay. For any income that is not subject to withholding, the IRS can provide information necessary to make quarterly payments to cover any amount to be owed. To make payments electronically.

Changes in financial circumstances could have an impact on taxes. For example, an increase in income, divorce, or selling an asset, may require adjustments to withholding or estimated payments.
By taking these steps, taxpayers will be better able to meet their tax obligations and avoid tax day surprises.

Will I Go to Jail?

A long-standing practice of the IRS has been not to recommend criminal prosecution of individuals for failure to file tax returns, provided they voluntarily file, or make arrangements to file, before being notified they are under criminal investigation. The taxpayer must make an honest effort to file a correct return and have income from legal sources. A letter from the IRS concerning taxes is not a notice that a taxpayer is under criminal investigation.The IRS helps to get people back into the system as part of its long-term plan to improve voluntary tax compliance. The IRS wants to get people back into the system, not prosecute ordinary people who made a mistake. However, flagrant cases involving criminal violations of tax laws will continue to be investigated.