Every year the IRS, state, and local agencies go through the complicated process of managing every individual and business tax filing made in the U.S. In 2020 alone, the IRS processed more than 240.2 million federal tax returns, and those were just for individuals. With all the recent growth in small business startups and development, that number grows exponentially.
Of course, not all of us are overly excited about paying our fair share to the government. In 2014, about 7 million U.S. taxpayers failed to file their returns on time or at all. This may seem like a minor oversight, but not getting your taxes in at the appropriate deadline can seriously affect your future revenue streams.
What Happens if You Do Not File Your Tax Returns?
The IRS has been given a lot of leeway by the federal government to pursue those involved in tax evasion. This is not meant to be a scare tactic but more a reality of the situation. There have been plenty of cases like with Al Capone, Wesley Snipes, Pete Rose, Willie Nelson, and even our former president Donald Trump where the IRS or local agents have pursued legal cases based on unpaid tax obligations.
Whatever your personal opinion about these cases, they do show that not filing your taxes can lead to legal troubles most would rather avoid. If you do not file your taxes, you may suffer consequences like:
- 1-3 months = You will start to receive notices that a balance is due to the IRS, with each progressive letter becoming more severe in tone.
- 2-6 months = The IRS may issue a tax lien and your property or financial assets. These are public records issues that do get reported on your credit.
- 3+ months = You will be issued a levy. This is the actual seizing of your property, financial assets, or anything else the IRS can sell for cash.
5 Reasons to File Your Taxes Early
The best way to avoid all of this messy bureaucracy is to simply file your taxes as early as possible. That way, you can get the peace of mind that you have fulfilled your obligation and use a legal accountant, bookkeeper, or lawyer to pursue any issues that may pop up without being forced into a penalty situation. Other benefits of filing your taxes early include:
1 – Faster Possible Returns
The average 2020 tax refund was $2,546, with more than 125 refunds being issued by the IRS. That is a significant financial pie that you are going to want to enjoy. While not everyone is eligible for a refund, the only way to know for sure is to file your taxes as early as possible.
It can take several weeks for paper returns or processing complicated filings. When you file early, you tend to see a refund check well before the rest of the country is still preparing their statements.
2 – More Time to Pay
In the case that you do owe an amount of money to Uncle Sam, you may want to have as much time as possible to come up with the financial resources needed to issue payment. Even if you file your taxes in late February, you will have all of March and half of April to figure out how much you owe and how to make the payment.
This is an excellent strategy for households that e-file and need to spread the cost of paying taxes out over several pay periods. A lot of independent contractors (1099) will use this strategy if they have forgotten to file periodic estimated taxes throughout the previous year or if they have a large number of account receivables still open.
3 – Life Changes
A lot has happened over the past few years. The pandemic has caused many families to move, postpone college, and reevaluate their spending habits. Having your financial information filed and in hand allows you more flexibility to work with lending agencies, educational institutions, business loans, and credit checks based on accurate income/expense reports.
4 – Prevents Identity Theft
It is an unfortunate reality that there are a high number of identity thefts in our country. During the 2016-2017 tax season, an estimated $1.7-$2.3 billion was stolen from federal tax returns. That is a lot of money from many families who could use it for food, lodging or even taking that family road trip they have always wanted. Filing your taxes early ensures thieves cannot get access to your account because it has already been closed and dealt with.
5 – Peace of Mind
Tax season can be a stressful time for individuals and business owners. Paying your taxes early rips off the band-aid of dealing with the situation instead of slowly building up the anxiety of what could happen in the near future. Avoidance leads to stress, while filing early leads to reality. Getting it done early offers you the comfort of knowing the situation has been managed, so you have the freedom to move on to other issues.
Getting Started
Don’t be overwhelmed by your taxes. Hire a bookkeeper to prepare and manage your accounts so you can relax knowing everything is done correctly. There are also plenty of software applications recognized by the IRS like TurboTax that can help guide you along the process of digitally filing your taxes. Get it done now and out of the way so you can get back to enjoying life.
