7 Financial Risks of Late Tax Payments
The paying taxes is a necessity in every society. However, people do find ways to evade this money that they are mandated to pay to the government because of reasons are best known to them. These reasons are negligible compared to the risks of either not paying taxes or paying them late. But how many people know this. Do you know the financial risk of not paying task when you are supposed to do so or not even paying at all? If yes, then why are you still engaged in such a risky act that is capable of wreaking havoc on your finances. Perhaps you don’t know, so we will be sharing the financial risks of late tax payments.
Just as I mentioned earlier, If you are the type that finds it very difficult to pay tax or you pay tax late, there is a guarantee that there are some financial havoc coming your way soon. I know you might be having a cricket running round in your stomach right now as a result of the statement above. I don’t think you need to be that disturbed, because you did it intentionally. What you should try to find out is, what type of financial risk am I open to and how can I close the door to this risk.
Before any other thing, you need to know exactly what taxes are used for. This will give you a better understanding of the financial risk of late tax payments.
USES OF TAXES
The government has no money of its own, the summation of individuals taxes is what generates revenue for the nation.
- Government use it to take care of mandatory spending, which includes, unemployment, agriculture, Medicare, transportation and many more. This holds the largest share of the generated taxes
- Discretionary spending which involves the money spent on internal affairs and also international affairs.
- Money spent on interest on the federal debt
Based on those brief explanation on what taxes are used for, I am sure you now know how important taxes are to governments. Where there is no tax, no governmental body can stand. Below are the financial risk of late financial payments.:
YOU WILL PAY A PENALTY FEE
Late payment of tax attracts penalty that must be paid. Before your penalty is decided, there are two types of not paying your taxes that will be used to decide your penalty. It is either you fail to file your tax or you didn’t pay at all. If it were that you fail to file your tax, you will have to pay a certain percentage for a period of time-based on the policy in place. Perhaps, you didn’t pay at all, you will be charged a premium penalty. If you then neglect the payment of this penalty, it moves to the next financial risk below
PAY A HIGH-INTEREST RATE
The moment things gets to this stage, you have no other option but to pay interest on the penalty already on the ground. The payment of this penalty alone is capable of wreaking havoc on your finances, talk more of the additional interest added. The interest rate varies, you can check country constitution to learn more
IRS WILL SEND YOU A NOTICE
A notice from IRS is nowhere near a good news for your finances. This is because IRS will give you an ultimatum of 30-60 days to sort out the tax Issues on the ground and if you don’t, they will come at you with full force to collect all they can lay their hands one. This fear of them coming at you will prompt you to make some bad decisions that might end make you lose a considerable amount of money trying to get yourself out of the mess.
There is one important thing that you need to put at the back of your mind. It does not really matter whether you have the money to pay for both the premium and the interest rate. If you fail to respond before the notice ultimatum is due, you will dance to the tune of a new music below.
LOSE YOUR SOCIAL SECURITY
The IRS makes use of a Federal Payment Levy Program to take away some of your assets after going through some due process under the law. They may also render you useless by either taking way your work licence, take the tools that you use to work way and even deprive you of some certain benefits that you are entitled to. For example, those benefits paid to your child. Your social security is one sure thing that they are capable of taking away from you.
YOU WILL RECEIVE A FEDERAL TAX LIEN
A federal tax lien is the claim IRS makes on your property. They are protected under the law to also do this. That is why it is advisable for you to pay your tax in time to avoid the wrath of IRS. More so, this tax of a thing benefits you in one way or another. Therefore pay your tax on-time to prevent other things from happening.
YOUR DEBT WILL REFLECT ON YOUR CREDIT CARD
All your unpaid debts will reflect on your credit report the same way other credits show. The appearance of tax debt on your credit report is a bad sign and can limit you from accessing credits to either finance your personal business or personal expense. Financial institutions don’t consider tax as good debt. Therefore, it is best for you to stay away from it.
YOUR PROPERTY MIGHT BE SEIZED
IRS has the authority to use the lien to seize your property if things are not getting better. Properties that can be seized include cars, house and even bank accounts. This also has a way of affecting your finances.
All these financial risks of late tax payment are far greater than evading the tax itself. Therefore, it is very important for you to pay your taxes at the right time to avoid all these financial risks.