When you do not file proper tax returns or when you file an inaccurate return , you have a tax debt. However, figuring out if you owe IRS money or how much you owe can be a challenge. The tax code gets complicated, and it changes each year.
Depending on the situation, you may need to find answers to the questions related to tax audits. Here a tax professional can help you.
Here is some information to help you find whether you owe the IRS money and how much.
Why Should You File Tax Returns?
The law requires individuals and businesses to file tax returns annually. If you don’t owe any money to the IRS, you may still need to file a tax return for reporting.
It is a common misconception for taxpayers to assume that you don’t need to file a return if earned income is below the foreign earned income exclusion.
The fact is that there’s a tax liability until a return gets filed to claim the exclusion benefit. If not filed timely, you may lose the right to claim the benefit. It is essential to avoid the situation of filing taxes late.
No one wants to come under the IRS tax audits scanner.
If you don’t file the taxes on time when the law requires you to do so, you will face penalties. If you fail to pay the taxes you owe, your penalties will be greater. Filing the required tax return before the due date and paying the tax debt to the IRS is important.
The specific filing requirements for taxpayers change annually. So, this is important to stay up-to-date on the latest news so you can ensure you comply at all times. If you aren’t sure whether you need to file a return. You must contact a tax expert for assistance.
Understanding Interest And Penalties
The IRS assesses penalties and interest on unpaid tax debts for several reasons. Some of the most common penalties charged include:
- Failure to file
- Failure to pay tax
- Failure to pay estimated tax
When you don’t file the required tax return, the penalty will be equal to 5 percent of the unpaid tax you need to report on the return.
If you do not pay the tax, they require you to pay, you will owe an additional penalty assessed on your tax debt. The penalties will continue until you have paid everything you owe.
Many taxpayers will owe more than one type of penalty when they have a tax debt. Depending on this amount of debt, these penalties can accumulate. For this, it is essential to act when you learn that you have unfiled tax returns or unpaid tax debts.
No matter what, hiring experts to prevent tax audits will be helpful always.
How Do I Know If I Owe The IRS?
Many taxpayers aren’t sure whether they owe any money to the IRS. You should find out how much you owe the IRS. It can lead to confusion when you live and work overseas. You may owe the money to the IRS if:
- You meet the filing requirements but didn’t file- the IRS has established basic requirements that show when you must file a tax return.
The requirements apply to all taxpayers, including those who live and work abroad. Also, the exact amount would depend on your specific situation.
- You have received IRS notice- In most cases; the taxpayers owing money to the IRS receive a notice indicating the amount they owe and demanding payment.
If you received such notice of tax audits from the IRS, you owe money and need to take action to revolve the debt soon.
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