If you believed rocket science was complex you will in all probability become amazed by the American tax system which has a tax code and is more complex than any rocket science. April 15 is a date which everyone dreads because it has a connection with the IRS. Taxes are hated by most Americans and the hatred comes down from the days when Great Britain placed a tax burden on American colonies. The taxes imposed by the British led to many revolts which may not be a possibility right now but have you ever wondered about the consequences if you decided not to pay income taxes for a year? Let us look at the consequences you are likely to face.
The Consequences Of Failing To Pay Income Taxes
When you decide not to pay income taxes during a particular year the government wouldn’t be overjoyed with your decision and would initially send you a letter reminding you of your responsibilities. A failure to respond will bring in more letters which eventually would lead to a final letter being sent along with a bill. The government will take a look at your past records to determine your income to send you an SFR which is also known as a substitute for return.
If for any reason you have been laid off or have had to take a significant pay cut after finding alternative employment the bill sent to you would have considered your past income which could have been higher and assessed your taxes accordingly. However, if you have simply forgotten or decided not to file your income tax returns the bill will include just standard deductions with other entitlements being ignored. You will also be made liable for penalties for the error you committed which could be as high as 50 to 75% of the total amount owed.
Tax Avoidance Also Has Political Consequences
You are advised not to consider investing in tax avoidance because despite being possible the official rate of taxes do not necessarily correspond to the sum of money you are required actually to pay taxes. You are eligible for deductions of various types and therefore the rate of tax may not really reflect the kind of money you need to pay. Moreover, it also gives the tax authorities an indication of your political attitude towards taxation depending on the technology used for avoiding the taxes. Your political attitude towards taxation will bring upon you unwanted political consequences which could lead you to plenty of trouble. Rather than get into an unwanted problem you will do better to try and understand how income taxes actually work.
The Functioning of Income Taxes
You could be happy and excited when you receive your first paycheck after working hard for the entire month but may be surprised by a line in the pay slip which mentions net pay. It may not be the figure you had been promised because government agencies would have taken slices of your paycheck because employees generating an income are required to pay federal income tax.
Income taxes were introduced by the federal government in 1863 and it was only in 1913 that income taxes became a permanent feature of the US government. A constitutional amendment which is identified as the 16th amendment states that the Congress has the power to collect taxes on incomes regardless of where the individual derived the income from. Changes to the 16th amendment by way of tax brackets have been introduced and the tax brackets are presently in the region of 10% to 39.6%.
Americans are accustomed to thinking about taxes every April without understanding that the process of tax collection runs throughout the year. The rate of taxes you need to pay will be determined according to your income but you will also be eligible for certain allowances depending upon whether you are single, married or have dependent children. They are identified as personal allowances and can be listed in the appropriate form which is provided.
Filing for income taxes should not be a scary subject because you are just making a settlement with the IRS in April but you have been paying your taxes throughout the year. If you have paid a sum of money which is in excess you will be liable to get a refund. On the other hand, if you have paid a lesser amount you will be required to make another payment. The income tax forms are confusing and can mystify even the best. If you do not understand the forms you will do well to consider using the services of a tax expert who will be able to help you appropriately. If you decide to ignore paying income taxes you are only inviting trouble from the governing authorities who will be happy to impose penalties and even recover any accrued interest on the funds that were outstanding. Therefore you should never begin thinking about not paying income taxes.
