Consequences for Non-Compliance of Tax: What Every Taxpayer Needs to Know

Noncompliance with tax laws is all about serious issues, which are caused afterwards in terms of finances and laws, too. These consequences are different and depend a lot in terms of the seriousness of the violation, it also depends if the offense was intentional or unintentional. In this article we tend to look at the things consequences for noncompliances in terms of tax requirements.

Fines and Penalties in terms of failure to file and failure to pay

One of the most critical consequences of noncompliance is the severe criminal penalties caused by related tax authorities like the Internal Revenue Service IRS in the United States or other authorities in the relevant countries. These things are often formulated to tell people about the consequences of tax evasion and educate them about the punctuality of taxes and precise tax filing. These are the following types of penalties:

• For people who fail to file a return by the given deadline, the IRS is obligated to provide a penalty and interest of 5% of the taxes that are due for every passing month and the tax return is due. For people who are due in terms of a refund, untimely filing can also result in penalties.
• For people who are punctual in filing their return but fail to pay taxes by the deadline, you can be eligible to pay a 0.5% penalty per month of the due taxes. If this is still persisting for an extended period, the penalty can be increased to 1% per month.
• Employers who are not able to pay their taxes can face penalization starting from 2-15%, which is based on how late the payment is.
• If the IRS finds out that you are trying to avoid tax responsibilities in your tax filing and an audit is conducted, you can be fined up to $5000.

Penalization for tax noncompliance

In addition to consequences, the IRS and relevant tax authorities will require penalization on unpaid taxes. This interest rate is formulated by the IRS and involves the federal income tax return laws and a short-term rate, which is 3%. Interest piles up daily and can quickly rise up. This makes up for a lot of due tax liability and a lot of tax expenses over time. In short, the more you ignore the taxes, the more the interest and financial burden you will incorporate.

Failure to pay taxes results in a Tax lien

A tax lien is a claim filed by the government on your property because of tax dues. The IRS and other tax ruling authorities have not received payment for the owed taxes if this is the case. Therefore, they are eligible to file a tax lien for your assets.

This generally means that the government can claim your property, such as cars, homes, and bank accounts.

If you tend to sell your property, the government can stop this process to fulfil your debt.

Significant tax failures and late filing

Tax liens are visible on your credit cards and are liable to damage your credit score as well. This can further affect your process of gathering loans, mortgages, and other types of credit. This is because your current image is affected by a tax lien visible on your credit card.

Failing to file willfully leads to prosecution.

There are cases where tax noncompliance can be intentionally done by the person. This involves aspects like tax evasion, fraud, and deliberately failing to file taxes. For these kinds of things, criminal prosecutions are issued. Criminal offences with respect to tax evasions are the following and can cause severe penalties and legal consequences:

• Fines are for serious tax issues. The IRS is liable to impose a lot of substantial penalties, like hundreds of dollars, that can vary on the offence.
• Tax crimes like tax fraud, evasion or deliberate evasion of taxes mean imprisonment. For instance, tax evasion means that you can end up in prison for up to five years, and intentional evasion of taxes can put you behind bars for up to three years.
• There are some cases when a person can be eligible to be sentenced to probation. For this time, the person is observed and must comply with the tax restrictions and requirements as prescribed by the court.