According to the latest data from the US Internal Revenue Service, Americans were obliged to pay more than $ 114 billion in taxes, fines, and interest in 2020. Obviously, millions of people continue to be delinquent in taxes, despite severe penalties, foreclosures of assets, and even the threat of imprisonment.
- Each year, working Americans need to file an income tax return with the IRS to report not only total income from employment, but also other activities such as investments.
- And each year, millions of taxpayers are found to underreport their income and unpaid taxes, and are subject to billions of dollars in taxes, interest and fines.
- The reason could be a simple mistake, such as a delayed submission or an incorrect tax calculation. This can be avoided with careful inspection and preparation.
- Other reasons are more vicious. Failure to report taxable income in extreme and intentional cases can result in imprisonment in addition to fines.
Daniel Morris, Certified Public Accountant (CPA) at Morris + D’Angelo, a Silicon Valley-based accounting firm, says that for many reasons people are lagging behind the tax eight-ball. Some of them are more common than others.
“There was a’too busy excuse’, the person’s life was out of control, and he was simply overwhelmed and unable to complete the paperwork,” he says. “Usually, I believe that person will reach” next week. ” ”
“Then there is a more valid excuse for life turmoil,” he adds. “You may have died, illness, cancer, divorce, or unemployment and have failed to meet your normal compliance requirements.”
Los Angeles-based certified accountant Harlan Levinson says that both individuals and businesses receive a lot of calls each year about tax delays.
“There are countless reasons,” he says. “Some people don’t want to open mail or don’t have time to pay taxes.”
“Then there are Americans who don’t have the money to pay taxes or are overwhelmed by the entire tax filing process.”
Whatever the reason, if your tax is stagnant for reasons other than financial difficulties, it is important to reassess your tax plan. The price of negligence is too high. The IRS will come after you and won’t stop until you pay.
This is a more specific list of reasons why otherwise conscientious people are delinquent in taxes.
One of the most common mistakes taxpayers can make is failing to file a tax return. However, if you live in the United States in a particular year and earn more than your minimum income, you will need to pay taxes and file a federal tax return to report your income.
The IRS uses three criteria: age, filing status, and income to determine if a filing is required. Generally, when you reach a certain income level, the law requires you to apply. The amount is adjusted annually to accommodate inflation.
In the 2020 tax year filing, individuals under the age of 65 must file at least if they do the following:
- $ 12,400 as a single filer.
- $ 18,650 as a householder.
- $ 24,800 because the couple applied jointly and both spouses were under the age of 65.
For individuals over the age of 65, the revenue threshold is slightly higher.
- $ 14,050 for a single filer
- $ 20,300 for householder filer
- $ 26,100 for a couple applying jointly if one spouse is 65 years of age or older
- $ 27,400 for couples applying jointly if both partners are 65 or older
By law, your employer withholds taxes from your salary.What you may not know is if you don’t have enough taxes If you are withdrawn from your salary throughout the year, you, as an employee, are obliged to pay the IRS when you file your tax return during the tax season. This is also called “insufficient withholding”.
This is usually triggered when an employee claims excessive tax exemption on IRS Form W-4 (filled in at hire). This means that there is not enough income tax withholding throughout the year.
You can submit a new W-4 at any time. And if you realize you’re giving the government too much, you’ll get your money back when you submit your income tax.
Do not pay estimated tax
Another common form of tax delinquency is associated with business owners and entrepreneurs.
Most self-employed people are responsible for paying their taxes quarterly, depending on their income and estimated tax payments.
Because they are self-employed, they have no employer to withhold taxes from their salaries. This is usually an effective backstop for people who may forget to file their tax returns. However, if you are a self-employed person and fail to pay the estimated tax throughout the year, you will be obliged to pay a large amount of tax at the end of the year.
There are various ways to calculate your estimated quarterly tax payments. Be careful not to struggle to earn your daily expenses or impose heavy taxes or underpayment fines the way you choose.
Due to Hurricane Aida, some residents and businesses in Louisiana and Mississippi, New York, Pennsylvania, and New Jersey have been granted an extension of the IRS filing and payment deadline. Most are related to future due dates for quarterly submissions and payments.
It’s not just self-employed Americans who are busy with time. Everyone is busy these days. Several other reasons people may be renting the IRS are related to what is happening in their personal life. Taxpayers may be unable to file their tax returns on time or pay the full amount of their taxes due to family crises or emergencies that occur before or after the tax season. In such situations, the IRS will invoice the taxpayer for the unpaid amount.
Other taxpayers may simply misunderstand tax law and receive tax exemptions, deductions, and credits that they are not eligible to claim. In this situation, the IRS will usually contact the taxpayer and notify you of a reporting error. Next, the taxpayer must verify the tax exemption, deduction, or credits earned. In the absence of evidence, the IRS will correct taxpayers’ tax returns, and taxpayers may incur fines and interest in addition to large tax obligations.
One easy way to fix most of the reporting errors is to use tax software or hire an accountant. These resources warn about situation-related deductions and reduce the number of errors.
What the IRS does
In any of the above situations, if the IRS determines that you are taxable, the IRS will not be ashamed to catch you.
The IRS usually sends invoices by mail, but it may also contact you by phone.
In serious cases, they may even try to visit you at work or at home.
If the agency is unable to voluntarily force you to meet your tax obligations, it may take a collection action. It has the authority to put a lien in your home and decorate your wages. It also tackles penalties and interest until your debt is paid.
To avoid IRS payments, focus on spontaneity and educate yourself on tax filing and payment obligations. If you are uncertain about your tax filing or obligations, hire a tax accountant or professional tax writer. It’s not a bad idea to contact the IRS directly for information.
Best of all, always be careful and always file your tax returns on time, no matter what you owe.
“My best client is a planner,” said Larry Pon, owner of Pon & Associates, a San Francisco-based tax planning and financial advisory firm. “They are involved and know what’s going on.”
That’s good advice — just don’t be late to take it.