There’s a misconception that “If I don’t’ file, the IRS won’t know.” This misconception can lead to deeper problems with the IRS. What failing to file a return does is set off a host of terrible things, including penalties, notices and worse. What most people don’t know is that filing a return on time can help avoid a 25% penalty even if the money that is owed on the return is not sent at the same time. We see so many people who could have saved THOUSANDS OF DOLLARS on penalties if they just knew this one thing. So in the future, no matter what is going on in your life, file all tax returns on time, even if you don’t send in the money owed with the return.
Small business owners or self-employed individuals in particular, are a common threat to the IRS since there’s usually no automatic withholding system in place. Some business owners might not understand that they are expected to pay their taxes on a quarterly basis, or they simply they not be able to take care of payments. When money is short, many employers tend to pay the employees first, even if they have to skip paying themselves. If you were to call the IRS to explain the situation, the IRS wouldn’t care about your financial hardship. They wouldn’t care if employees are risking being out on the street. All they care about is your failure to send their share of payments.