Here are seven reasons for not being late filing your income tax returns.
1. Avoid Late Filing Penalties
Late filing can result in substantial and continuing penalties. This is in addition to any interest that is due.
2. Receive Better Service from Your Tax Professional
The earlier you get your paperwork to your tax professional, the sooner he can start preparing your tax returns. More importantly, there will be more opportunities to explore and implement tax saving strategies. On the other hand, if you file late, you tie your tax professional’s hands.
3. Avoid Criminal Charges
Of course, if you don’t file tax returns at all for a few years, you may also face charges of tax evasion. Willful failure to file a tax return is a misdemeanor pursuant to Internal Revenue Code (IRC) 7203. In cases where an overt act of evasion occurred, willful failure to file may be elevated to a felony under IRC 7201. (1)
4. Prevent Bankruptcy
Generally speaking, persons who don’t file tax returns on a timely basis also lack adequate records for managing their business. Since they don’t keep their bookkeeping and accounting up-to-date, they only think they know how they’re doing and how they stand financially. This, of course, is a recipe for financial disaster.
5. Enjoy Better Relations with Tax Authorities
Late filers also receive the unwanted attention of the taxation departments. Non-compliance can result in audits, aggressive collection action and legal proceedings. In addition, if you ever do have extenuating circumstances that might call for some leniency or extraordinary consideration on the part of the tax department, you are more likely to receive it if you have a flawless history of co-operation and compliance.
6. Obtain Financing
You’ll have difficulty obtaining financing if you can’t provide your financial institution with current income information. Assessment Notices from taxation authorities give banks more assurance that the income claims you make are true. As well, if you haven’t filed your current income tax returns, what hidden tax liabilities exist? What is the state of your record-keeping? How do you run your business without adequate financial information? Your bank may hesitate to loan you money or refinance under these circumstances.
7. Reduce Stress and Worry
Many people who are late filing their tax returns feel guilty about it. At the back of their minds, they worry about taxation authorities contacting them, audits, asset seizures, criminal prosecution, penalties and interest, and so on. Some of these worries can become magnified beyond what the actual situation warrants. Save yourself unnecessary stress by filing your income tax returns on time.
Do you have a Federal Tax Issue? The Neighborhood Christian Legal Clinic – Low Income Taxpayer Clinic can consult with you to provide advice regarding your IRS tax issues, and/or potentially act on your behalf for FREE if you qualify for assistance (come to a clinic intake session)!
Jim Floyd is the Staff Enrolled Agent at the Neighborhood Christian Legal Clinic – Low Income Taxpayer Clinic.
As an Enrolled Agent, Jim is a federally-licensed tax practitioner with unlimited rights to represent clients before the Internal Revenue Service. This means he is unrestricted as to which taxpayers he can represent, what types of tax matters he can handle, and which IRS offices he can represent clients before. Enrolled agent status is the highest credential the IRS awards.
To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits, and adhere to a stringent code of ethics.