Avoiding Late Tax

Every year, you dread tax time. Wading through the mountains of paperwork, the disarray of receipt after receipt... and all while trying to do run your business successfully. Who really has the time, energy or sanity to complete the meticulous paperwork involved in tax return filing - and get it done on time! Rushing through it is not an option - mistakes happen when you rush and when it comes to your tax return filing, mistakes can lead to a whole other bag of troubles. But if you submit late tax returns, there are penalties to be dealt with. You do have options; however, you just need to know what they are.

What is an IRS Tax Return?

Firstly, an IRS tax return is the general name for the form used to file taxes payable to the federal or local government, which is filed with the IRS. This form includes information such as your gross income, allowable deductions, tax credits and tax that is due. As an individual taxpayer, you would file the Form 1040 on a calendar-year basis. Corporations should file the Form 1120 on either the calendar-year or fiscal-year basis.

Also, tax returns must also be filed for partnerships using a Form 1065, estates with Form 706 and Form 709 is used for gifts you have received. The IRS, or the Internal Revenue Service, is the federal agency that is responsible for administering and enforcing the American Treasury Department's revenue laws through the assessment and collection of taxes and other related procedures.

What is Involved in Tax Return Filing?

Filing tax returns involve sending the tax return to the IRS once all the forms have been completed. You can file tax returns either manually or electronically, although electronic filing (or e-file) is generally encouraged over manually filing where possible. This is because there are many benefits for electronic filing, compared to manual filing. Electronic filing offers secure, paperless filing of your tax returns and ensures that your filing is delivered as you will receive electronic acknowledgement when it has done so.

It allows you to avoid unnecessary trips to the post office and the possibility of the tax return getting lost or delayed. Also, you are able to file federal and state taxes at the same time. Finally, electronic filing offers payment options like direct deposit, electronic fund withdrawal and allows you to file early but pay later too. E-file also keeps a secure record of all your tax returns, to ensure that you hold onto your current and past tax returns as required.

What Happens if You File Your Tax Return Late?

If you should file a late tax return there are ramifications that you will have to face in most cases. If your tax return is to be filed by accountants or tax attorneys, there is an extension of the due date that can be negotiated between the IRS and the tax attorneys or accountants. If you are owed a tax refund, the IRS usually are not too concerned when you lodge your return, they seem to be happy enough to hold onto your tax refund for as long as you let them.

However, if you are calculated by the IRS to owe them money, this is when you will have to face the ramifications of your inaction. Late fines ranging from $110 to $550 will apply if you manage to file your late tax return within four months of the due date. Fines of between $550 and $2,750 will be charged to you if you have still not filed you tax return after four months. Interest is then added to the amount of outstanding tax that the IRS calculates that you owe them.

The amount they calculate that you owe them will also probably be more than you would normally owe them, as they will not be dedicated to giving you tax deductions that they cannot support (as they don't have the supporting documents). So even if you are six months late with filing your tax return, it will still be beneficial to you to lodge it. If you are found to be avoiding tax, more serious financial and legal penalty will, of course, apply.

Lodging lat tax returns is not ideal and can be avoided by using electronic filing (e-file) or adequate tax attorneys. Don't make the mistake of letting it get away from you - be proactive!