A lot of people get into trouble because they don’t know a thing about taxes. As a result, we’re seeing a rise in tax evasion penalties meted out to these errant citizens. It pays to be knowledgeable about taxes because the cost of ignorance is quite steep. We’re talking about penalties, charges, and possibly even imprisonment. And to help you further your education about taxes, we’re presenting you with 10 things you need to know about tax evasion penalties:
- If you fail to file your taxes, the IRS can actually do it for you–at your expense and to their benefit. By not filing, the IRS will take the liberty of coming up with a computation of the taxes you’re liable for. This computation is done to your disadvantage because they don’t have your tax refund information.
- You will pay dearly for missing to file your taxes. The IRS will charge you with a late filing penalty. This penalty is computed as 5% of the tax you owe per month. While this amount is not that big if you’re late for just a couple of months, this can balloon out of proportion when you miss filing for a year.
- You will pay more if you fail to pay your taxes. The charge for not paying the balance is 0.05% per month (but can’t go over 25%). Add this up with the penalty for late filing and you’re already on the losing end.
- You won’t be charged with a criminal tax evasion case until the IRS convinces a judge that you deliberately missed filing or paying. You’re generally fine if you just happened to miss filing or paying. But if they get proof that you transferred your assets to another person, then that’s tantamount to evasion.
- You can always reason to the IRS that you had no intentions of not paying, but don’t think you can get away easily. They will find other ways to charge you. If they don’t get you in court, they’ll rack up your penalties and other charges.
- The IRS can garnish your account if you don’t respond to their calls or letters. Garnishing means they can freeze your bank accounts and investments. Once your accounts are garnished, you won’t have the means to withdraw money from these financial instruments.
- As for your assets, the IRS has been vested power by the government to put liens on them. This means you won’t be able to sell or rent out these properties. It’s always best to respond to the IRS whenever they reach out to you.
- Don’t think that garnishment is only up to the freezing of your cash. The IRS can actually go as far as pulling money straight out of your accounts. If they have enough proof of your deliberate evasion, then they can exercise their power to draw money from your bank accounts.
- Tax evasion is a form of Tax Fraud. If convicted, the guilty party can expect to spend time behind bars. To add salt to injury, they will also expect to forfeit their property and assets to the IRS.
- There are ways to avoid getting hit with Tax Evasion charges. The best way is to respond to the IRS when they send you a letter. A careful explanation should be made on why you missed filing or paying your taxes. If ever you owe money to the IRS and can’t afford to pay it, you can request to pay it in installment plans.
To cheat on your taxes is foolhardy. The IRS will be hot on your trail the moment they catch errors or discrepancies in your tax returns. Furthermore, if you happen to deliberately miss paying or filing your tax, the IRS will come down on you with the full force of the law. Wise up and spend some time learning about how to do your taxes.
Avoid these tax evasion penalties by making sure to file your taxes accurately and on time. There are certified public accountants you can hire to help you out with your filing. Talk to these professionals and they can show you how to legally lessen the tax you have to pay.