Taxes are a tricky part of the financial system. Many people have run into trouble by underreporting their taxes or failing to remit them. But what do you do when you find that you owe back taxes? Pay them up.
An experienced Denver tax advisor at E.A. Buck Accounting & Tax Services notes that the Internal Revenue Service (IRS) does not play with such knowledge. Such individuals or businesses could be served with a tax audit notification, which most likely will be the beginning of their woes.
But why should you remit back taxes, file late tax returns, and clear up your tax defaults? Here are some reasons.
1: Avoid trouble with the IRS
The most obvious reason to file your late tax returns and pay up back taxes is to get the IRS off your back. Any tax and accounting professional would advise you to do the same.
In most cases, getting on the Internal Revenue Service’s radar isn’t a good thing. The tax audits will scrutinize your financial records, determine where you are lacking, and levy a huge fine. On top of that, you may also face criminal charges for tax evasion or related offenses.
Having such a criminal record can affect your finances in many ways. In fact, you may face fines so huge you would have been better off filing late tax returns.
So, in essence, filing your late tax return is cost-effective and saves you from going to jail.
2: You can file your own version of the taxes
One thing is true; the IRS does not play with owed taxes.
Filing your own taxes allows you to carefully consider items or purchases with tax exemptions, exempt incomes, and even seek tax relief or rebates on some purchases or income. On the other hand, the IRS may fine you an outrageous amount for having missed your tax filing and having evaded it.
Dealing with the IRS’ calculation of your taxes, as well as the fines can be hard. It will also cost a lot of money, especially as you need to hire a tax attorney and a team of tax accountants for the relief process.
You can save yourself from financial risks simply by reporting your late taxes as quickly as possible.
3: The IRS may owe you money
Filing your taxes late does not mean you won’t get tax reliefs or rebates. Doing your taxes, however late they may be, can qualify you for some rebates. This rebate puts more money in your pocket and gives you the peace of mind of knowing that the IRS isn’t after you.
People who have earned too little during the financial year may be tempted to skip their tax filing, after all they earned little and haven’t been requested to file their taxes. However, doing this can expose you to some hidden benefits – including tax refunds based on your recorded earnings/spending.
So, if you’re unsure of whether to file your late taxes, now is the right time to start the process. You may end up getting a couple of hundred dollars from the IRS as rebates for your spending in the year under review.
4: You may qualify for a tax refund
Professional tax preparers aim to maximize all possible legal avenues to shave off extra dollars from their client’s tax filing every year. However, clients may still be eligible for some tax refunds as deemed fit by the IRS.
Tax refunds are a product of setting aside more money than necessary for your taxes. So, filing your late taxes may indirectly put some more money into your pocket at a later time. You can also rest assured that such refunds are legal for you to have and spend.
Filing your late or back taxes is an important consideration for individuals and businesses looking to maintain a clean criminal and financial record. If you have missed one or more tax return filing, it is best to consult with a tax professional immediately to get advice on how to proceed.
Ultimately, it is recommended that you file your back taxes before it is 10 years old. Failing to do this can expose you to huge fines and can also rob you of your chance to claim tax refunds.
Ready to seek advice on filing late or back taxes? Contact a tax advisor nearest to you. Ensure that such an advisor is experienced, reputable, and certified. You can also speak to friends and loved ones to seek recommendations for the right tax professional to consult.
