Compliant or Non-Compliant – Does it Matter?
Yes, it Matters!
I’m going to make this topic short and sweet…if you file personal 1040 tax returns by the filing deadline, you are compliant with the IRS. And the same for business tax returns.
Conversely, if you don’t file personal or business tax returns by the tax or extended deadline, you are non-compliant.
Did you know, if you don’t file personal tax returns it is tax evasion? Tax evasion is punishable as either a misdemeanor or sometimes a felony! And can lead to jail time…seriously. The same rule applies to business returns. The IRS hits non-compliant taxpayers with sledgehammers.
Sledgehammers hurt more than hammers!
If you know you owe money, and you can’t afford to pay the tax bill, file your tax return anyway and by the deadline. Filing on time will save you money because the penalties are a lot less severe. And most of all, you won’t be red-flagged as non-compliant, meaning the target on you won’t be as big.
You Ask: “What’s The Penalty For Not Filing On-Time Compared to Filing and Not Paying?”
Here’s the answer: The failure-to-file penalty is 5% per month of your unpaid taxes for each month your tax return is late, up to 25%.
If you still don’t file (get compliant) after you’ve racked up 25% in penalties, 3% plus the federal short-term rate kicks in. If not handled, this result can bankrupt taxpayers.
What if you do file, but you don’t pay?
The good news is that you are considered compliant. The IRS can and will charge you a failure-to-pay penalty. The penalty is generally 0.5 per month of your unpaid taxes. A 0.5% monthly penalty versus a 5% monthly penalty is a huge difference.
Keep in mind, as long as your tax bill goes unpaid, the 0.5 failure-to-pay penalty keeps adding up but cannot exceed 25% of the tax owed. And you’re paying 3% interest plus the federal short-term rate.
Miss a couple of years or more, and it can be a financial (and legal) disaster!
The penalty punishment for filing taxes on-time is much less severe. But more importantly, you are considered Compliant. Being compliant gives you options.
Why or How Does Non-Compliance Happen?
There are many reasons: divorce, business breakup, medical event, a spouse dying, blatant tax evasion; however, the biggest reason people don’t want to or can’t pay the tax bill.
They think by not filing, the IRS won’t know how much they owe. Theoretically, it makes sense.
I’m going to assume you might be someone who is noncompliant and in some way what I described above describes you?
If I didn’t know what I know as an Accountant and Enrolled Agent and found myself in a financial situation with a big tax bill, I might make the same mistake.
The IRS Doesn’t Stop By Punishing You With Penalties and Interest.
The IRS’s reach is endless. When taxpayers choose to ignore the IRS, they begin to bring out their armament.
It’s like watching the Russians or the Chinese put on big military parades showing off their human-killing weapons.
The IRS is the largest and most powerful debt collector in the world.
The IRS isn’t going to physically kill you, but they have the potential to financially ruin you.
That’s why we exist. We’re here to protect taxpayers who experienced a life-changing situation, and the best solution at that time was to not file their taxes.
If the IRS is threatening you. Harassing you. You feel your back is up against the wall, that feeling can end today.
So, if you have unfiled tax returns, which means you are non-compliant, you can’t, in any way, move forward resolving your tax problem until you are considered compliant with the IRS.
I and my team of tax resolution professionals can get you compliant.
Once you or your business are in compliance, then we can move things forward to remedy your situation with the right solution that works for both you and the IRS – that’s where our ability to speak their language comes in handy.
Get behind our shield of protection. Make today the last day you deal with the IRS. Schedule a Free consultation using one of the contact methods below. We look forward to speaking with you.