There are many ways for individual taxpayers to run afoul of regulations. Sometimes, people misrepresent their finances and underreport their income. They could then face allegations of tax fraud or tax evasion. They could be at risk of prosecution and may owe a large tax debt.
Other times, people who transition to different career opportunities might overlook certain income tax obligations. Those who recently started a small business or began working as independent contractors may be unaware that they need to make estimated quarterly tax payments, for example. Taxpayers can easily make mistakes regarding their federal income tax responsibilities.
They may fail to file the annual tax return intended to reconcile their prior estimated contributions with the true amount of income taxes due. Unless it falls on a weekend, April 15th is the last day to submit an income tax return to the Internal Revenue Service (IRS).
What happens when a taxpayer does not submit their return on time?
What they owe may increase
Technically, income tax returns exist primarily to validate the amount of tax liability an individual has. In scenarios where the taxpayer should have received a refund or perfectly estimated their taxes beforehand, the failure to file a tax return does not carry any significant financial consequences.
However, the failure to file a return when there are taxes due can lead to significant consequences. The first is the possibility of penalties and interest. The IRS assesses penalties for the failure to pay the amount owed and also begins collecting interest as soon as the taxes come due on April 15th.
Interest can quickly add up to increase the total amount that the taxpayer owes. Developing a significant backlog of past-due taxes can also result in scrutiny from the IRS. Taxpayers may be at risk of an audit and legal controversy if they fail to file their tax returns and pay what they owe. They could face collection efforts as well.
Individuals who have unfiled tax returns and past-due tax debts may need support when they communicate with the IRS and attempt to resolve the matter. Discussing the circumstances surrounding an income tax controversy with a skilled legal team may help taxpayers limit the consequences they’re facing because of a simple mistake.