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Can The IRS Be Really Scary?

Updated: Oct 11


Coast to Coast - IRS help

IRS Tax Relief - Tax Debt Help

Let's begin with this question. "What if I fail to file a tax return?"

If you fail to file a timely tax return by April 15th or October 15th with an extension, the penalty is 5% per month of the unpaid tax due. The penalty is charged monthly for up to 5 months. If the tax return is filed more than 60 days late, the minimum penalty is $435. If you continue to have an unfiled tax return, the IRS will create a tax debt by the implementation of a Substitute for Return (SFR). An SFR is not a real tax return, it is an assessment that allows the IRS to collect money. The IRS needs a debt, so they will create. An SFR allows the IRS to enforce collection. They created tax debt that, coast-to-coast will be highly inflated. Also, you will not be able to stop a wage garnishment pr a bank levy until that tax return is filed. That can be very scary.

What if I fail to pay the tax that is due?

If you filed a tax return but did not pay the tax, the penalty is 0.5% of the tax not paid to accrue every month up to a maximum penalty of 25%. The penalty can be lowered too.25% if you set up installment payments or raised to 1% if it remains unpaid after an IRS notice to levy property.

If you did not file a tax return or pay the tax due and the failure to file a penalty and failure to pay a penalty both apply, the failure to pay penalty will reduce the failure to file the penalty.

Interest will accrue on the unpaid balance from the due date of the return until the tax is paid. The interest rate is the federal short-term rate plus 3%. As you can read, it doesn't take very long for an IRS debt to get very large, very fast.

What if I don’t pay enough tax through withholding or estimated tax payments?

If your federal tax due will be more than $1,000, you must pay at least 90% of your expected tax due for this year or 100% of your tax due for last year (110% for high-income taxpayers). If you do not withhold enough from wages, pensions, and Social Security or make sufficient estimated quarterly payments, you could owe an underpayment penalty that is often relatively modest and based on how much you underpaid. What if I get audited? Let's hope that you aren't being audited for tax fraud. Cases of extreme fraud can be treated as tax evasion, for which it is possible to be prosecuted and sentenced to jail; however, less than 1,500 of the 150 million taxpayers in 2015 were indicted for tax evasion. Most indictments are related to taxpayers who concealed assets or income (like a bank account or income from a side hustle) and who do not claim the assets or income even after a tax notice or audit. I didn’t pay on time. What could happen to me? Here's the good news. One thing the IRS can no longer do is damage your credit with the use of a tax lien. Starting in 2018, tax liens are no longer reported by any of the three major credit reporting agencies. Now, a tax lien can still be filed and it will attach to all of your possessions, but it won't show on your credit. OK. That was the good news. Now the scary bad news. In cases with more substantial underpayments, the IRS can order a tax levy (wage garnishment and/or a bank levy). The agency can seize your federal and state tax refund as well as your wages, bank account, or seize property such as financial accounts (brokerage), cars, and homes. This article is brought to you by the tax professionals at Flat Fee Tax Relief. Our teams are strategically located in Clearwater, Florida, and San Diego, California. Our coast-to-coast tax resolution firm is available from 8 A.M. Eastern to 6 P.M. Pacific time.


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