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Topics: Tax, Tax outsourcing, Tax prep support outsourcing, Tax preparation, Tax season

The True Cost of Tax Procrastination

4 MIN READ | Posted on November 11, 2022
Written By Divya Ramaswamy

The True Cost of Tax Procrastination

Did you know that a whopping 19 million American taxpayers requested the Internal Revenue Service for extra time to file their 2021 individual income tax returns? While a variety of factors might have led to tax procrastination, such as the shifting due dates, tax law changes, the IRS backlogs, and the underestimated reason: taxpayer burnout, it will cost you dearly.

Traditionally, April 15 is Tax Day, when the individual federal income tax returns and payments owed (if any) are due. But considering how the IRS postponed the April 15 deadline to July 15, 2020, and May 17, 2021, many taxpayers weren’t ready this April as they have gotten used to having more time to file and pay during the past two consecutive tax seasons.

But the bigger problem: 56% of Americans don’t even know when the deadline is!

 

Tax procrastinationSource: IPX1031
Source: IPX1031

SO, HOW COSTLY ARE THE PENALTIES?

Upon missing deadlines and failing to file your taxes by the deadline, the IRS will be charging you interest on the unpaid balance, alongside a late payment penalty that would range from 5% to 25% interest on the amount you owe each month it went due.

Failing to file a penalty is 5%, and not paying the penalty is 0.5% of the unpaid monthly taxes, up to a maximum of 25%.

WHAT ARE THE OTHER CONSEQUENCES OF TAX PROCRASTINATION?

Your Tax Returns Might Be Delayed

If you are looking to receive a faster tax refund, you really shouldn’t procrastinate filing ITR. Most people who file tax returns get refunds, and it generally takes the ITR about three weeks to process refunds. While this is the case when you file electronically, paper returns can take twice that turnaround time or longer.

You Might Lose Out On Interest If You Are Owed A Refund

With tax procrastination, you might risk losing the money the government owes you, and when taxpayers fail to file their tax returns within three years of the return due date, you end up forfeiting any cash the IRS owes you. The earlier you invest your refund or use it for a high-interest-earnings savings option, the more interest you will receive on it over time.

Rushing Can Cause Mistakes. You Might Need An Audit

You rush when you fail to file your ITR within the deadline. When you don’t have ample time for tax preparation, there could be a lot of mishaps, and you might need an audit. Not only is an audit going to cost you money, but you also need the resources and time.

You Might Miss Out On Favorable Billing Rates

Your tax preparers might give you favorable billing rates if you are an early bird. Tax procrastination will not only cost you a penalty, but you might also miss out on tax preparation cost savings.

No Extra Time To Plan The Taxes You Owe

It is a great reason to file ITR early, as it will give you extra time to pay the taxes you owe. Filing early will give you time to arrange your payment, and you don’t want to miss out on that.

Your Refunds Might Be Prone To Identity Theft

Many people who file late have become victims of tax refund fraud. Between 2015 and 2019, the IRS prevented fraudsters from stealing $26 billion via identity theft refund fraud. But billions still ended up in the hands of these thieves. Filing early might not completely prevent identity theft, but it can protect your refund. Fraudsters might file a return using your social security number before you do, and the IRS will kick out your return since their records will show that you have already been refunded. In such cases, it might take months to clear up the mess with the IRS and finally get your refund.

BOTTOM LINE

Most experts agree and recommend that it is best to start your return at the earliest. The decision to file early might depend on your return’s complexity, especially if you receive a refund. It is best to follow the advice of a tax advisor to ensure that your return is accurate and complete. And to delegate your tax preparation to an offshore tax preparer who would do the same and ensure that you don’t miss the deadline.

QXAS’ TAX PREPARATION SERVICES FOR CPA FIRMS

Your search ends with us if you are looking to partner with the best offshore tax preparation services provider. In fact, the top accounting firms in the USA have achieved cost & time savings by delegating their tax prep requirements to us. Ours is a dedicated team of offshore tax preparers trained to work independently. Our managed FTE solution provides a dedicated manager or team leader who will work exclusively on your requirements.

Book a Free Consultation

Looking to outsource your accounting firm’s tax preparation requirements? We can help! Book a call immediately to find out why our tax preparation services for CPAs are the best.

Divya Ramaswamy
divyaramaswamy

With a brain that buzzes for data and a heart that beats for creativity, Divya strives to craft narratives and strategies that resonate. She's currently on a quest to create insightful and relevant content that helps accountants make informed choices about outsourcing. Off the clock, she's all about vibing to Indian classical tunes or donning her hat as a home baker.

Divya Ramaswamy

With a brain that buzzes for data and a heart that beats for creativity, Divya strives to craft narratives and strategies that resonate. She's currently on a quest to create insightful and relevant content that helps accountants make informed choices about outsourcing. Off the clock, she's all about vibing to Indian classical tunes or donning her hat as a home baker.

Unauthorized copying or plagiarism of our content is a violation of intellectual property rights. We take such matters seriously and will pursue legal action to protect our original work. Anyone found engaging in such activities will be held accountable under applicable laws.

Originally published Nov 11, 2022 02:11:45, updated Nov 14 2022

Topics: Tax, Tax outsourcing, Tax prep support outsourcing, Tax preparation, Tax season


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