The 2011 deadline for filing tax returns is just around the corner. For individuals who have yet to file taxes, it is important to make sure you do not miss this deadline to avoid potential negative consequences. For many filers, tax season is a stressful time of year, when gathering documentation and filing a tax return sometimes feels overwhelming. Changes in tax laws contribute to this often dreaded time of year, however these factors should not discourage taxpayers from filing a timely return. There are in fact many benefits to filing a tax return, a few of which we will cover here.
One of the more obvious motivators for tax-filers is receiving a tax refund. This occurs when the amount of taxes withheld throughout the year exceeds your tax liability. When the IRS processes your tax return, they will issue a tax refund. If you do not file a tax return, you will not receive your tax refund. Failure to file your Federal tax return within three years of the date in which it was due will result in the loss of that refund forever. Low wage earners or those who are not required to file an income tax return may be missing out on possible refunds. Credits and deductions may be claimed which result in a refund that would otherwise be lost if a tax return was not filed.
If you fail-to-file or file a late return, expect to see additional penalties and fees added to any tax liability which you may owe. To avoid these fees and penalties for filing late or not filing at all, make sure your tax return is filed either electronically or by mail on or before the deadline (April 18th for 2011). It is not only people who owe who have to worry, there are also drawbacks for individuals who are anticipating a refund. For these reasons, it becomes obvious why filing your return, on time is very beneficial.
That’s right. If you don’t file your tax return, the IRS may do it for you. When this occurs, the IRS take the information it does have regarding your finances, in this case earned income reported on W-2’s and 1099’s and applies the very basic deductions. Without the benefit of your own filed return, many credits and additional deductions for which you may qualify will be overlooked. This could result in not only losing your refund but also owing the IRS money when it is all said and done.
Being on the receiving end of collection efforts from the IRS is not a desirable place to be. If you owe a tax liability, filing your return on time is the best possible move. Otherwise, you may find yourself the target of wage garnishments, tax liens and levies and other aggressive collection actions taken by the IRS to collect the money they are owed.
There are many other benefits to filing a tax return. In many cases the benefits are in fact, the avoidance of negative consequences. Nevertheless, filing your tax return should be a top priority each year to ensure you receive all the credits and deductions to which you are entitles as well as reducing any additional tax liabilities you may owe.
This post was published on March 24, 2011