Every US resident and non-resident is obliged to file returns. They should file before the set deadline for taxes,which varies from state. Many people, especially those not living in the US, forget to meet the tax obligation.
Whether you are a J-1 participant or an international student, it’s worth noting that you should file your tax return with the IRS. Failing to file in the given deadline calls for severe consequences.
First, you can blow out your chances of securing a Green Card or US Visa in the future. Also, you risk paying severe fines and penalties.
The two types of penalties you can face include late payment and late filing. If you’re subjected to late filing, you’ll pay more significant fees as compared to the late payment costs. What does that mean? That means that it’s better to file your tax return as early as you can because you can do so even if you don’t have enough funds to pay.
Scenarios for Missing the Deadline for Taxes
Let’s look at three scenarios of missing the deadline.
1. If you miss deadline for taxes and you owe the IRS Money
Missing a tax deadline while owing IRS money puts you in a graver situation. You should know that the same way you receive income statements, so does the IRS. It can access your statements such as 1098s, 1099s, and W-2s any time and track the amount you’ve earned in a year. More surprising, IRS knowswhen you miss a deadline and if you’ve been granted an extension.
Moreover, the IRS will compile a tax return report for you and notify you of the amount you owe to the federal government. The report will omit any deductions or exemptions you should pay. Therefore, you must include such information when filing your returns.
After compiling the report and notifying you, the IRS will take a collection activity against you. Some of the severe activities include levying and seizing your assets such as your bank account, secondary car or home, retirement savings, life insurance policies, and real estate.
The best part with the IRS is that itnotifies you before the collection activity against you. You’re granted 30 days to either dispute the intention or settle your arrears to avoid it.
Be warned! Never ignore any written notices from IRS if you want to safeguard your assets. You may regret it.
The best thing you can do is to pay your taxes as soon as possible to be on the safe side.
2. If you miss tax deadline and you are owed a refund
Here is the sweet spot. The IRS will be happy to keep your money if you’re owed a refund. But, it’ll harass you with fines and penalties if you keep their money.
If you’re owed a refund, chances remain that nothing might happen to you. More interestingly, the IRS may fail to deduct penalties or any interest from the refund. That said, it’s upon you to file and claim the refund at your will.
Don’t get it wrong! That doesn’t mean you should neglect carelessly filing your returns.IRS will never notify you about any tax refund, unlike when owing them money. Again in the sweet spot, IRS doesn’t have any issue with you lending it more money than legally entitled.
Notably, the federal government offers people who want to collect their refundthree years to file their returns. Again, you should file the next year’s return if you mean to collect your refund.In other words, you’re the one to determine whether to receive your refund or not- by choosing to file or ignore.
3. If you miss tax deadline and you can’t pay your return debt
Sometimes, it’s challenging to pay all the debt to the IRS when you don’t have enough resources. Don’t panic!
Here is the good news: you can benefit significantly from the various payment options available.
One of the best options is going for the IRS Fresh Start Program. This program helps you to pay your debt in installment for agreed years. Interestingly, the program considers your monthly income before fixing the amount you should pay as your installments. Isn’t that wonderful?
While on this program, you’re allowed to pay an affordable amount each month so you can reduce your tax return debt. It’s worth noting that a certain amount will be automatically deducted from your savings or checking account each month to meet your obligation.
Even better, the IRS Fresh Start Program allows you to make financial hardship case if the installments agreed can’t be met by your monthly budget. Also, you can raise a claim (with evidence) that even paying that amount will increase your financial hardships. If IRS notes that you’ve met the criteria for financial hardships, it may lay off collecting the debt from you.
The second option is to apply for penalty abatement. Under abatement, your interests and penalties are canceled from your tax return debt. It eases you on paying the amount you owe.
Lastly, you can make an Offer in Compromise. Here, you offer to pay what you owe for a lower amount. However, your monthly income, as well as the value of equity that your liquid assets can produce, determines how much you should pay.
In conclusion, always remembernot to miss the deadline for taxes in your state to avoid fines and penalties.