Putting off filing your tax returns is easy, especially for those who have busy schedules. If you miss this deadline or are just ignorant about filing your taxes, you could be thinking about skipping the entire process altogether. Unlike other petty cases, failing to file your returns will eventually catch up with you, subjecting you to several penalties that might be costly. Below are the reasons why filing your tax returns is important:
1. You can’t get away without paying taxes
Like other government agencies, the IRS handles millions of data from different sources. It may be slow to act, but they have the advantage of information. For instance, your employer sends copies of Form W-2 every year to the IRS if you are employed.
Banks, businesses, and investment companies also submit Form 1099, which reports all forms of income received during the year to the IRS. If you sell properties, the IRS probably has data showing how much you were paid for the sale. With all this information, the IRS expects citizens to file taxes based on the income on W-2 forms. While it may take the agency some time to determine your tax returns, they will eventually figure out if you don’t file returns.
2. Avoid unnecessary stress
Failing to meet your bill demands is stressful. Falling behind on paying your taxes is even worse. Fortunately, you can avoid this stress by filing your returns on time. There are various tax software options that have made it easy to file returns before due dates. The tools also guide you on the applicable tax benefits and deductions. You can also amend your returns later if you believe you missed something.
3. Waiting leads to greater consequences
Regardless of how long it takes, the IRS will determine that you have filed your returns. Once the agency discovers, expect a notification letter stating the possible penalties for failing to file these returns. The agency can also help by creating your returns. For instance, they can make calculations based on wages reported by your employer.
Unfortunately, the catch with this is that the IRS won’t include any applicable tax benefits and deductions you deserve, forcing you to pay more taxes. If you don’t respond to their notification, the agency escalates the issue, and they can seize your money in the bank or put liens against your property.
4. If you don’t owe, you file for a refund
The IRS has strict guidelines outlining who should file taxes and those exempted. If your income is more than the minimum taxable income, you should file tax returns even if you don’t think don’t owe anything. Fortunately, you can file for a refund within three years. You can also benefit from various credits, such as Earned Income Tax Credit.
It is prudent to file your taxes before the deadline, even if you cannot pay immediately. Preparing your taxes also makes it easy for tax experts to work on your wealth management in the future. Failing to pay attracts a late filing penalty charged 5% monthly based on tax income owed. You can also file for a tax extension, which gives you more time to organize your taxes.