As the IRS undergoes budget cuts, some taxpayers may be considering skipping their tax filings this season. However, failing to file can result in significant penalties, with the agency imposing a 5% fee per month—capped at 25%—on unpaid taxes.
IRS Budget Cuts Raise Filing Concerns
Amid staff reductions and growing uncertainty, some tax professionals are noticing an uptick in clients questioning whether they need to file this year. While frustrations with the IRS may be increasing, experts warn that avoiding tax obligations could lead to severe financial penalties.
Late Filing Penalties Can Be Costly
The IRS enforces stringent penalties on those who fail to file on time. The “failure to file” penalty is significantly higher than the “failure to pay” penalty, which charges 0.5% per month on outstanding tax balances. This makes it crucial for taxpayers to at least file a return, even if they can’t pay in full.
Tax Protestors Face Even Steeper Consequences
A subset of non-filers, often referred to as “tax protestors,” argue that federal tax laws don’t apply to them. These individuals can face federal tax court cases and additional penalties, including a $5,000 fine for filing a “frivolous tax return.”
IRS Staffing Shortages May Affect Refund Processing
With layoffs reducing the agency’s workforce, tax processing times could slow. IRS data indicates that individual tax filings are down 5% year-over-year, likely due to taxpayer uncertainty and delays.
Key Takeaway: File on Time to Avoid Penalties
To avoid costly penalties, taxpayers should file returns by the deadline, even if they cannot pay their full tax bill immediately. An extension can provide extra time to file, but it does not extend the time to pay taxes owed. Those struggling with payments can explore installment plans to stay compliant with tax regulations.
For more details on IRS filing penalties, visit the official IRS website.
