Introduction

Individuals are required to file income tax returns with the IRS. In case the return has not been filed until the date specified by the IRS, an individual has an option to file past due return.If you don’t have proper knowledge about file income tax returns then you should go to the Rainiertamayo and know about the income tax returns. Any negligence on the part of the individual to file a late return can result in the following situation/process:

a) Increase in the Amount of Tax Payable:

In case an individual is liable to pay any tax on the income earned by him/her during the relevant year, IRS will calculate interest and penalties on the amount due. Interest is charged from the due date of return till the time of payment. Interest will be calculated by using the formula: short term federal interest rate plus 3%. This interest rate keeps on changing every three months. Penalty at a rate of 5% per month is levied on the amount of tax not paid.

This rate can go up to 25% (that is 5% for each month up to 5 months). However, if the return is filed after 60 days from the due date, a minimum penalty of $ 100 or 100% of the tax amount that is still due (whichever is lower) will get levied. However, if an individual is entitled to refund of tax already paid by him/her, no such penalty shall be levied.

b) Substitute Return by IRS:

A substitute return will be filed by the IRS on your behalf. IRS will file such a return based on information obtained from other sources. Since IRS may have limited information on the actual figures, there is a possibility that your income tax liability is increased on account of no adjustment of any deductions, exemptions or expenses which you would have claimed had you filed the return yourself.

c) Tax Collection by IRS:

Based on the tax assessment made by the IRS, the tax collection process will get started. The amount of tax due can be adjusted against your wages, or money in your bank accounts. IRS may even file a federal tax lien against your property. Such a lien is created only after an individual fails to pay the tax so assessed by the IRS. This lien entitles the income tax authority to use your property as security or for payment against the amount of tax due. Notice of such a lien can affect the credit rating of an individual. As a result, it may become difficult for an individual to obtain credit from the market.

d) File Return:

Substitute return filed by IRS should not be considered as a solution to your problems or as an alternative to the filing of the income tax return. In case you have some benefits to claim in the form of extra deductions or exemptions, you should file an income tax return.

Tax amount, when combined with the penalties and interest charges, levied as a result of a delay in return filing or payment of taxes can result in a substantially high amount. This amount will have to be paid in any case. Hence, it is advisable to file an income tax return and to pay tax on time as per the timelines specified by IRS