Don’t Wait

While you may feel there is no point in sending in late documents, you absolutely need to act now. File your return as soon as it is complete. A tax professional can help you complete your filing but will be an added expense. Sign all your forms and send them via US Mail with Certified/Return Receipt services to ensure the tax office has received your paperwork.

If You Don’t Owe Taxes

When you complete your taxes and find the IRS owes you money, you will not be penalized. The only downside for you is your refund will be delayed. You can actually get refunds for taxes filed up to three years passed due but finally so late is not something you should attempt.

If You Do Owe Taxes

Send in a check for as much as you can afford. Your penalties for a late filing will depend on how much you owe in back taxes. The late filing penalty is currently at 5% of the total amount you owe to the government for each month you are late. Even if you are only one day late, the penalty for the full month is incurred. There will also be accrued interest at a rate that depends on the current market.

If you need to make payment arrangements, you will also need to include a completed Installment Agreement form with your filings. The Installment Agreement is your request to make monthly payment arrangements to pay off your total debt. It will depend on the total amount you owe and how much money you can afford to pay in each month until the debt is satisfied.

Facing the Fees

Penalties can get quit costly and the later you file, the stiffer the penalty. Even one day late will accrue penalties and interest which increases the overall amount you owe back. The penalty for filing just one day late is 5% of the original balance owed. The maximum penalty for failing to file by April 15 is 25% which is reached by September 16^th, five months after the original due date. Taxes not filed within 60 days of the due date will be penalized whichever is the lesser of $135 or 100% of the unpaid tax amount.

Fraudulent Issues

If you have not filed your taxes with the intention to commit fraud, expect a significantly higher tax penalty. The rate for penalty will be increased from 5% a month to 15% a month. The maximum amount of penalty can be 75% of the original total amount of taxes owned. This penalty is not initiated very often but the IRS will enforce this penalty if fraud is obviously being attempted.

Dealing With Penalties

The IRS has the direct authority to reduce your tax penalties or even eliminate them altogether provided you make the proper request (penalty abatement). If you can prove ‘reasonable cause’ for not filing your taxes on time, you may have your penalties reduced or waived. The type of permissible excuses varies on a case-by-case basis.

Overall, the IRS wants to work with people who want to be helped. Communication is essential in working through the process of filing late taxes. If you are upfront with the IRS and make an honest attempt to make good on your debts, you can work through the process relatively unscathed. On the other hand, if you choose to ignore your tax obligations or try to cheat the IRS on taxes, you’ll pay considerably not only in taxes but you can face possible legal consequences.

Related posts:

1. File Late Tax Returns to Take Control of Your Back Taxes
2. Make Contributions to IRA Until April 18th to Reduce 2010 Taxes
3. Tax Filing Deadline for 2010 Taxes is April 18th, 2011

1. Don’t offer a free consultation or free tax analysis: Many of the more reputable companies will offer this because they want to get to know your tax situation and financial situation before they take you on as a client. There are cases when a tax relief company would not be a good choice for a taxpayer. An ethical company will try to understand your situation before saying they can help you. Some companies rush to get you as a client before even knowing why you owe taxes and what your financial situation looks like.
2. Promise an offer in compromise: An offer in compromise is a great tax settlement that is only available to people who really deserve it. If the tax company promises you an offer in compromise settlement right away, you can turn your back and run. Acceptance rates are very low for this type of filing and even people that are good candidates regularly get denied, so therefore no tax professional can guarantee this type of settlement.
3. You were contacted by the company through a cold call: Companies that use high pressure sales tactics to get clients typically don’t have good services to back up their claims. They will use hard sell tactics and pretty much say anything in order to get you as a client. Hiring a tax relief company should not be rushed and it would be best if you avoided a company with these types of marketing tactics.
4. Watch out for large retainer fees: Some companies will charge large upfront fees before any services have been provided, this is not an industry norm. Sometimes they will require a small retainer fee in order to get started on the case but never a large portion of the total amount that will be owed.
5. You feel rushed when talking to them: This can be a red flag and could mean that they are taking on too many clients and won’t allocate enough time to successfully work on your case. Sometimes it is a good sign when they are a bit busy because it can be a sign that they actually do offer good services and they are in demand, but sometimes they tend to get greedy and take on too many customers. Many times companies will get really busy during the latter part of tax season. If you know you have a problem it is better to contact a company before this time so they don’t try to rush your case.
6. Bad Ratings Online: Many tax relief companies have done terribly with the better business bureau and other online complaint sites. Many top tax resolution companies actually have an F rating, which means there have been many unsatisfied clients and that company has not taken the appropriate actions in order to clear up these problems. It is a good idea to look at reviews and look for bad information written up on the company on sites such as rip off report or the BBB website.

Avoiding any of the above red flags can greatly increase your chance of finding a great tax relief company. Feel free to talk with multiple tax relief companies that offer a free consultation or tax analysis, you will start to get a good feel of which one will provide you the best service as long as you keep the things above in mind. Be sure to ask a lot of questions and move onto the next company if you don’t agree with the way they are handling your case.

If you would like a free tax consultation from us, please contact use by filling out the contact form or by calling the number on the site. Our tax professionals will give you a free tax analysis and an overview of what they feel they can do for you.

Related posts:

1. American Tax Relief Shut Down as Tax Relief Scam