Avoiding your tax responsibilities because of anxiety or fear of what you might owe is a common reaction. However, this avoidance can lead to significant financial penalties that compound the very anxiety you're trying to escape. Let's delve deeper into the consequences of failing to file versus failing to pay your taxes and why it's crucial to tackle tax filing head-on.
The High Price of Hesitation
The most severe financial consequence of delaying tax filing comes in the form of penalties and interest. If you fail to file, the IRS imposes a penalty of 5% of the unpaid taxes for each month or part of a month that a tax return is late, up to a maximum of 25%. This is in addition to a failure-to-pay penalty, which is 0.5% of unpaid taxes for each month or part of a month the tax remains unpaid, maxing out at 25%. When combined, the total penalty can reach up to 47.5% of your total tax bill, not including the additional interest that accrues on your unpaid taxes.
The Misunderstood Aspect of Filing Late
One common misconception is the penalty associated with filing late when you're actually due a refund. In this scenario, there's no penalty for failing to file. However, there is a catch: if you wait too long to file, you may forfeit your right to the refund. The IRS gives you a three-year window from the original due date of the return to claim any refund you're owed. For example, if you neglected to file your 2020 taxes, which were due by April 15, 2021, you have until April 15, 2024, to submit your return and claim your refund.
Why Filing Late Is a Bad Idea
Beyond the financial penalties, delaying your tax filing can have other detrimental effects. It can lead to unnecessary stress, anxiety, and even impact your financial planning and credit rating. The longer you wait, the more complicated your tax situation can become, especially if you accrue several years of unfiled taxes.
How Verity CPAs Can Help
At Verity CPAs, we understand that taxes can be overwhelming, and the fear of owing money to the IRS can be paralyzing. But you don't have to navigate this alone. Our team of experienced professionals is here to provide guidance, support, and the expertise you need to address your tax situation head-on. Whether you're dealing with late filings, unpaid taxes, or simply need help preparing this year's return, we're here to help make the process as smooth and stress-free as possible.
Don't let tax anxiety dictate your financial well-being. Contact Verity CPAs today at info@verity.cpa or 808.546.5026, and take the first step towards resolving your tax issues and securing your financial future.