A tax return is an important part of staying on the straight and narrow when it comes to your finances as a business owner or independent/sole trader.
Filing your tax return early is going to help ensure you’re not ending up with sleepless nights due to the threat of the IRS on your back. By doing it early, you get the headache out of the way and it’s then not something you need to worry about until the next year when the next tax year is due.
Here are some of the reasons why filing your tax return early is essential.
Loss of Refunds
If you’re owed a tax refund for any of the tax years where you failed to file, then you might forfeit that money as a result. This is due to the IRS’s statute of limitations. So if you’re owed money that’s rightfully yours, by filing late, you could be missing out.
Penalties and Interest
If you’re not filing your tax return on time, then the IRS will be more than happy to slap on penalties as a result. Even if you simply forgot to do it, there are only a few valid excuses that will get you out of the penalty zone.
The longer you go without filing your return or making payment, the more interest will be added to your bill. The penalties can add up quickly and a maximum penalty of 25% of your unpaid taxes for each month the return is late, might be what you’re faced with as a result.
Legal Action
When it comes to the IRS, they have the authority to take legal action against anyone who isn’t complying with tax laws.
That could be that the IRS files a substitute return on your behalf and that may end up with a higher bill being presented to you. You can also incur civil penalties from them and collect unpaid tax returns through other means where necessary.
Criminal Charges
You may find yourself one step further along with the IRS where they choose to take criminal action against you. This might be in the case where tax evasion or fraud has been caused intentionally. These result in hefty fines and even imprisonment in some cases. Therefore, you want to take your tax obligations seriously.
Even though it’s a headache to deal with, it’s better to spend the time on filing your tax return early, than being faced with a criminal charge instead.
Tax Issues in the Future
When you don’t file your tax returns on time, it could complicate your efforts further when resolving any tax-related matters in the future. You might also find that the limits the options you have available when trying to negotiate payment arrangements or settlements that you owe.
Loss of Social Security Benefits
Finally, you might be missing out on social security benefits if you fail to return your tax return on time. This could really impact your future retirement income.
If you don’t file your tax returns, then you could end up in more trouble than it’s worth. Make sure you file your tax return as early as possible to avoid this problem.
