Wednesday, August 10, 2022

What If You Forget To Do Your Taxes

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Quarterly estimated tax payments need to be filed by their due date. If you don’t pay by the deadline, you risk a penalty for missing said due date. You may have missed it just a day you’ll still receive a penalty for it. This is why you may want to keep your taxes as organized as possible.

Keep the deadlines for when quarterly taxes in mind. Paying early is much better than paying late. Here were the dates for the 2020 tax year:

    The IRS is very serious about these dates, and they expect you to pay estimated taxes by that time without fail. The only exception will be if the date falls on a bank holiday. In that case, the payment needs to be done on the first day when it’s not a holiday or a weekend.

    Many people make the mistake of simply leaving it for the next due date, but here’s where it comes back to bite them: the more they push it back, the more they will have to pay.

    If you don’t pay quarterly, the payment won’t be reset by the next quarter. It will only just grow. So, by the time the next quarter comes around the quarter, you’ll probably have a penalty so big, you’ll barely be able to handle it.

    Heres What Could Happen If You Dont File Your Taxes

    Some Canadians may be tempted to avoid filing their tax returns on time because they cant afford to pay what they owe. They hope that the CRA might ignore their late or missing filing and get away with it.

    However, the CRA has multiple systems in place to find out if you have unpaid taxes. One of those systems enables the CRA to receive a copy of the T4 slips issued by your employer, making it easy for the agency to determine whether you paid your taxes or not.

    And once the CRA finds out that you havent paid your taxes, you have to pay whatever you owe in full plus a late filing penalty of 5% of what you owe and an interest of 1% for every month you are late, compounded daily starting May 1st for up to 12 months. If you know you owe taxes, doing nothing will only make things worse. Fortunately, there are several options available if you owe taxes and cant pay.

    In other words, failing to pay your taxes can attract a penalty of up to 17% of what you owe plus interest, making it more difficult to repay your tax debt. And thats not all. Not filing your tax returns is also a criminal offence.

    What Happens If You Don’t File Taxes For 10 Years Or More

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    You may have thought you didn’t have to file taxes because you didn’t make enough money or you were living overseas. However, most people who earn income over a certain amount still have to file their taxes. If it has been years since you filed taxes or paid taxes, you may still be liable for back taxes. You may also be able to claim money for refunds for prior years.

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    If You Owe Pay As Much As You Can To Reduce Penalties

    Although theres no penalty for submitting your taxes late when youre expecting a refund, the IRS may assess penalties if you owe taxes.

    Even if you miss the tax deadline, you should pay as much as possible as soon as you can. Taking this step can reduce any interest or penalties on your tax account, such as the Failure to File or Failure to Pay Penalty.

    If you file your tax return late, the IRS may assess the Failure to File Penalty for failing to pay unpaid tax due on the original due date . Unpaid tax is the tax required to be reported on your return less any withholding, estimated tax payments, and refundable credits.

    The IRS calculates the Failure to File Penalty as 5% of the unpaid taxes for each month that the tax return is late. However, the penalty wont exceed 25% of your unpaid taxes.

    You may also be assessed a Failure to Pay Penalty if you fail to pay taxes you report on your return by the original due date or an approved extended deadline, such as a federally declared disaster. Taxes that remain unpaid for a month will be assessed a Failure to Pay Penalty of 0.5% per month.

    In months where both the Failure to File and Failure to Pay penalties apply, the Failure to File penalty will be reduced by 0.5% . So instead of a 5% Failure to File Penalty for the month, youll be charged a 4.5%.

    To get a better understanding of how penalties may affect your account, speak to a tax professional to determine which penalties may apply to your tax situation.

    Can You File Taxes Without Spouse Present

    Don

    An individual may not file a joint tax return without the consent of the marital partner. Filing a joint tax return without the consent of the marital partner is a crime. If the IRS decides that your spouse filed the joint return intentionally and without spousal consent, they may face hefty financial penalties.

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    How To Apply For Tax Credits And Benefits

    You have to file your tax return in order to apply for tax credits and benefits. If you apply using a tax return software, you will automatically have to answer questions about tax credits and benefits.

    If you file a paper tax return in Ontario, you will have to complete and submit the ON479, ON-BEN, and ON428 forms in order to access tax credits and benefits.

    Do I Have To File Taxes

    This depends on several factors including your income type. From self-employment, through an employer or investments) and amount, tax filing status, age, and other factors.

    Generally, not everyone needs to file a tax return each year. In fact, you wont need to file a tax return unless your total income exceeds certain thresholds, or you meet specific filing requirements.

    Typically, if your income is less than the standard deduction, you don’t need to file a tax return. However, even if this is the case, you may still need to file a tax return if you meet certain conditions. You won’t need to file a tax return if all of the following are true for your situation:

    • Youre under age 65
    • Earn less than the 2021 standard deduction for your filing status
    • Don’t have any special circumstances that require you to file
    • Dont have unearned income of more than $1,100 for 2021 as a child or other dependent

    If you dont meet all of these conditions, you may need to file a tax return. However, in the event you dont meet all of these conditions, you may still want to file a tax return anyway. If you earned income during the year and had taxes withheld from your pay, to get any excess youre owed back via a refund, youll need to file a tax refund.

    The IRS doesnt automatically issue refunds if youve overpaid your tax bill each year. In that case, you want to file a tax return to claim any tax refund you may be entitled to claim.

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    Is It Too Late To Pay Estimated Taxes For 2020

    Technically speaking, the 2020 due date for quarterly estimated taxes has long since passed. The last one was January 15, 2021 – so, if you missed that one, you’re too late to pay your estimated taxes in their normal circumstances.

    The key phrase here is “normal.” While you are too late to pay the sum that you originally owed, you are not too late to pay your taxes overall. You’ll just have to pay the tax along with the penalty.

    The more you put the tax payment off, the bigger your penalty will become. This is why you need to make your estimated quarterly payment as soon as you remember it.

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    If you think you’ve made a bigger mistake you need to change your filing status, correct your income, or change your deductions or credits, for example then you’re probably going to have to correct your taxes through an amended return process.

    The IRS website offers an interactive tax questionnaire that walks you through the question, “Should I file an Amended Return?” The automated assistant asks various questions and, depending upon your answers, it will tell you whether or not you need to amend. You have three years to file an amended return.

    The more complicated the return is and the greater the dollars involved, having a tax professional who is well versed in these areas is recommended.Laurie Kazenofftax expert

    If you used TurboTax to file your return, the software can also walk you through amending your tax return, Lisa Greene-Lewis, a TurboTax expert and CPA, tells CNBC Make It. She adds that if you prepared your taxes with TurboTax Live, you can connect with the TurboTax Live CPAs and enrolled agents year-round to get help amending your return.

    But filing an amended return can also be done without help, especially if it’s something fairly straightforward. For example, say you didn’t include a 1099. That’s typically easy to resolve, Kazenoff says. If you’re missing a document, again, the IRS can handle this and typically alerts you by mail.

    Once you’ve followed those steps, here are a couple of other facts to keep in mind.

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    Determine If The Irs Filed A Substitute Return

    Just because you didn’t file your return doesn’t mean the IRS won’t file one for you. The IRS may file a Substitution for Return or SFR on your behalf. Don’t think of this as a complementary tax filing service. The substituted return may leave off the exemptions or deductions that rightfully belong to you.

    Once an SFR is filed, you will be sent a notice to accept the tax liability as filed in this alternate return. If you don’t respond, the IRS will issue a notice of deficiency. At this point, the tax is considered owed by you and the IRS can begin the collection process. To encourage payment, a levy can be placed on your wages or bank accounts. A federal tax lien may also be placed against your home and real estate.

    If an SFR was filed, you don’t have to accept the outcome. You can go back and refile those years and include any available deductions. You may be able to decrease the tax owed and reduce any interest and penalties.

    What Happens If I Dont File My Taxes Canada

        All Canadians have to file their tax returns every year. And unless the Canada Revenue Agency announces an extension like it did in 2020, individual taxpayers must pay their taxes by April 30, 2022 for the 2021 income year.

        Filing your taxes late and not filing your taxes at all can have severe consequences. Read on to find out what could happen if you dont file your taxes, how to file your personal income tax and benefit return, and more.

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        Qualify For The Streamlined Procedure

        There is one key point that allows you to qualify for the Streamline Procedure: Your actions must be innocent for not filing tax returns in the past. This could mean you didnt know how to file, were unaware of this tax obligation, or forgot. Youll need to sign a statement stating this fact on Form 14653 when you start filing through this program.

        What You Can Claim This Tax Time If You Work From Home

        What Happens If You Forget To File Your Income Tax Return?

        Now, where are all our receipts?!

        If youre one of the two-thirds of Aussies still working from home youre entitled to make a claim for work-related expenses, you incur. If you opt to do your taxes yourself and not through an accountant, heres a guide to navigating what you can and cant claim this tax time.

        The ATO says in order to claim a deduction for a work-related expense, there are 3 golden rules:

      • You must have spent the money yourself and werent reimbursed
      • The expenses must directly relate to earning your income
      • You must have a record to prove it
      • Anything that meets the three golden rules is your ticket to claiming these in your tax return and can be added in at the work-related expense of your return.

        However, if youve got an expense that was for both work and personal reasons, say the internet for example, you can only claim a deduction for the work-related time you used it. You also cant double dip, so if your employer pays your bills, or reimburses you for them, you cant add these into your own return that would be greedy!

        The ATO also states, in order claim your working from home expenses, you must:

        • Be working from home to fulfil your employment duties and checking your emails on the couch whilst watching Netflix doesnt count!
        • Incur additional expenses as a result of working from home.

        You can claim a deduction for the additional running expenses you incur as a result of working from home. Whats a running expense you ask?

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        What Is Repeated Failure To Report Income

        If you fail to report income more than once in a four-year period, this is considered a repeated failure to report income.

        For example, if you overlooked reporting some of your income on your 2016 return but had never forgotten to report income before, you will not face this penalty. In contrast, if you also failed to report income in 2013, you will face the penalty, as the issue happened twice. Conversely, if your failures to report income occurred in 2016 and 2011, you wont face this penalty because the instances are not within four years of each other.

        To trigger this penalty, the unreported income amounts must be $500 or more.

        If you forget to report $300 in income one year and $10,000 the following year, you wont face this penalty as the first instance does not count. However, you may face other penalties, late fees, and interest.

        Is There A Penalty For Filing Taxes Late If You Owe Nothing

        Filing your taxes late, even if you dont owe anything, can lead to complications.

        Filing your taxes late when you dont owe anything wont result in significant interest rates because the CRA cant apply interest on taxes you dont owe.

        However, not filing your taxes can lead to other issues. For example, not filing your taxes on time may disqualify you from government benefits or certain assistance programs, including the Canada child benefit , Guaranteed Income Supplement , or the GST/HST credit.

        Not filing your taxes on time may also affect your ability to qualify for other benefits or assistance programs running in different provinces and territories.

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        Failing To Deposit Withholding Taxes

        The IRS penalties for failing to deposit payroll taxes you withheld from your employees paychecks are severe. The first penalty is a late penalty of:

        • 2% if 1-5 days late.
        • 5% if 6 to 15 days late.
        • 10% if 16+ days late.

        In addition, the business owners or other responsible parties are personally liable for 100% of any deposit shortfall. This applies even if the business is a corporation or other entity that would otherwise provide protection from personal liability for business debts.

        Because payroll tax withholdings come out of your employees paychecks rather than from business assets, the IRS considers failing to make payroll tax deposits as essentially theft from your employees. The IRS may pursue additional civil penalties or criminal prosecution against any person who fails to make the required deposits.

        Who Has To Pay Estimated Taxes

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        In many cases, people forget to pay estimated tax payments simply because they did not know they had to make that payment in the first place. This is why people must know whether they need to pay quarterly tax or not.

        Self-employed people or individuals with a role in a business need to make quarterly estimated tax payments. This applies mostly if they expect to owe quarterly taxes going past $1000 by the time their tax return is filed.

        A corporation will have to file quarterly estimated tax if they believe they’ll owe more than $500 by the time their tax return is filed.

        Estimated tax payment is made quarterly, on a schedule that was set by the IRS. If you are a self-employed individual that earns higher amounts of money from various investments, then you’ll be expected to make estimated tax payments.

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        What To Do When You Forget To File Taxes

        When people realize that they forgot to file their taxes, their first instinct is often to panic. There are many ways a person or small business owner can make mistakes regarding their tax filing and obligations. The taxpayer may stress over how they could have possibly made this simple error. So now you need to know what to do when you forget to file taxes. The taxpayer may panic about the consequences the failure to file may have on their finances, taxes, and other concerns. Some people may worry about the IRS penalties and fines they will have to pay over the amount of tax already due and owning.

        Unfortunately idle speculation and worry over the tax obligation will not make it go away or bring you any closer to a potential solution

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