Falling behind on your taxes can be extremely stressful as well as very expensive. Taxes must be paid in full every year regardless if you are an individual or a business owner. Some business taxes must be paid on a quarterly basis. If you have fallen behind and are currently owing back taxes to the IRS there will be penalties assessed.
There are financial penalties for neglecting to pay your taxes on time. The penalties include failure to file, failure to pay and interest.
A failure to file penalty is assessed when you do not file your tax forms by the required due date. This penalty continues to be assessed until the tax forms are filed. Therefore each month that you fail to file an additional penalty will be assessed. This can become very expensive very quickly!
A failure to pay penalty is assessed immediately following the due date if the tax debt is not paid in full. Much like the failure to file penalty, a failure to pay penalty continues to be assessed for each month until the back taxes are paid in full. Obviously procrastination could be your financial ruin!
Interest is also considered to be a back tax penalty. Interest begins to accrue immediately following the missed due date and continues until the back taxes are paid in full.
Additionally the government can begin to garnish your wages, which means taking a portion of your paycheck every pay period until the back taxes are paid in full.
You do have a few options to avoid this highly stressful situation! If you know you are not going to be able to file by the due date, request an extension! You will not be penalized for filing late if you have an approved extension.
If you know you are not going to be able to pay the taxes currently due, contact the IRS and work out a payment plan. You may be able to pay a small amount every month until the debt is paid in full. The debt will continue to accrue interest but the penalties will be much less if any.
The point is that you must not procrastinate when it comes to paying the IRS. Whether you are an individual or a business owner, back tax penalties could destroy your financial life for years to come. You are guaranteed to owe hundreds or thousands more than your original debt if you do not take action before you are delinquent.