Ideally, you should always pay your taxes as soon as they become due. This includes assessments for deficiency. However, this isn’t an option for everyone. Sometimes, you just don’t have the money to make the payment. Ignoring the problem, however, will not cause it to just go away. In fact, there’s a larger chance that ignoring your tax obligations will cause your bill to become bigger. Here are the things that might happen if you don’t pay your taxes.
Interest on Taxes
Interest is the most common reason for the increase in the amount of taxes that are unpaid. You see, the US government sees any unpaid taxes as a form of debt; the taxpayer owes the government a certain amount of money that remains unpaid. Because of this, the government often levies interest on the amount due but is unpaid. Interest begins to accrue from the moment the tax becomes due until it is fully paid. So if you take a long time to pay the delinquency, the interest will keep on increasing. In some instances, it may even exceed the principal amount due.
Penalties
Another reason why the amount increases is because of penalties. Penalties and interest often go hand in hand together, but they may also be imposed without the other. Penalties are a form of punishment for not paying the taxes – Uncle Sam is seldom lenient when it comes to unpaid debt. The imposition of penalties will often depend on the type of infraction a taxpayer is deemed to have committed. Failure to file a tax return, for example, often merit a minimum 5% tax penalty. In contrast, fraudulent failure to file a tax return by the due date can incur a 75% tax penalty.
Is there a way to remove these?
It’s better to be proactive when it comes to penalties and interest. Pre-empt their imposition by choosing a tax relief option such as an installment payment or an offer in compromise.
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