Consequences of Failing to File or Pay Your Taxes

The IRS wields great power and the general public finds its rules convoluted, confusing and, sometimes, just plain weird. U.S. citizens and corporations are required to follow these rules. The knowledge, expertise and experience of a CPA are of great value and comfort when dealing with the IRS.

Individuals must file their taxes each year by the 15th of April* and Corporate taxes must be filed by March 15th* if the corporation is using the calendar year. Those using a fiscal year will need to adjust that, and can check with the CPA to be sure they have the correct filing date.

If a person or corporation anticipates needing to pay, but doesn't have the funds to do so, there might be a temptation to put the whole thing off and just do nothing. This is not in your best interest. Let your CPA help you. At the very least, go ahead and file your taxes. You can work out a payment schedule with the IRS to minimize the impact of any fines and interest. Your CPA can interact directly with the IRS on your behalf, where not all accountants have the ability or authority to do so.

What happens if you can't pay?
So, just what happens if you can't pay your taxes? To start, there are both penalties and interest. This is being written in 2018. Tax laws, including penalty amounts, can change. The  failure to pay penalty is 0.5% of your balance each month, up to a quarter of the original amount due. It is in your best interest to file on time and pay as much as you can. Trust your CPA to help you determine the best course of action, and to set up an installment plan if needed. It bears repeating, don't skip filing. The fees are multiplied if you fail to file. Lean on the expertise of your CPA when you have conflict with the IRS. They are here to help.

No matter how simple an IRS communication seems, always let your CPA address it for you. Be sure to have them handle it promptly so that no deadlines are missed that might add to the penalty amount.

Once the IRS becomes aware of your late taxes, their system, called the Automated Collection System or ACS, will begin sending you notices. These, like other IRS communications, should be given to your CPA so they can respond appropriately. If they send additional letters, the language will be more forceful each time. Just let your CPA handle these. Yes, you have a responsibility, but your CPA can ease the process and remove the panic from the situation.

If you have not worked something out with the IRS, additional consequences may occur, but with the help of your CPA, these are much less likely. Some of those consequences would be liens, levies and wage garnishment, frozen bank accounts and asset seizure.

Tax evasion and fraud, or a complete refusal to pay, will result in criminal prosecution. The IRS prefers to work with delinquent taxpayers, rather than have them put in jail. Intent to defraud can be difficult to prove, so the IRS will look for patterns of abuse before beginning a criminal investigation.

As was written elsewhere on this site, if you follow these rules, you have little to fear from the IRS:

  1. Be Honest
  2. Keep Good Records
  3. Let your CPA handle it!

Tanya Higginbotham, with over thirty years of accounting experience and 15 years as a Certified Public Accountant, is ready to help you through whatever situation you find yourself in with the IRS. 

*special rules for weekends and holidays

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