Late tax return bill will rise £10 a day from today

self-assessment

The end of January was a tough time for over 10 million people - as the deadline for submitting their tax-return (and payment) hit hard after the festive season. For 850,000 of them, it was particularly tough, because they actually missed their deadline for filing the return, and they were immediately hit with a £100 fine.

And from today, if they still haven't filed their return, life is going to get incredibly tricky.%VIRTUAL-SkimlinksPromo%
The good news is that by far the majority of people are covered. Some 9.6 million filed on time, and most of the rest slid in just after the deadline (600,000 of them). However, there will still be those who are struggling.

New penalties

If you haven't paid up, from 1 May, HMRC will add another £10 a day to what you owe until the day you file. This process will continue until 1 August - by which time you will have racked up a maximum of £1,000 in fines (including the £100 you got for missing the January date).

Even then the pain won't end. If you haven't paid by 1 November, you will have either 5% of what you owe, or £300 added to the total bill - whichever is higher.

And if you still haven't sorted things out by 1 February 2014, you'll pay another £300 or 5% of the outstanding amount (whichever is higher). HMRC also has the right to demand 100% of the tax due as a penalty if they believe you are a very serious case.

If, for example, you owed £10,000 in tax, by this final stage, you would be facing a bill of £12,000 - or £21,500 if you were deemed a serious case.

What can you do?

Clearly, if you are having problems completing a tax return, you need to act fast before the penalties get out of hand. If it's a question of struggling with the forms, there's lots of help available, from accountants and HMRC itself either online at www.hmrc.gov.uk, by phone, or at your local Tax Enquiry Centre.

For many people, however, the problem is paying the tax itself. The first port of call should be HMRC. If you can sort out a payment plan with them, they will usually freeze the penalties where they are. They will also usually give you the option of spreading the payments over a period of time.

If you cannot afford this, you'll need to go to a debt charity for advice, such as Citizens Advice or the StepChange debt charity. They may be able to negotiate with HMRC for you and arrange a payment plan you can afford. In the worst case situation they will help you consider other options - which could include bankruptcy.

There isn't a happy ending here. Solving the issue of a late tax return and an unaffordable bill is never going to be straightforward. However, if you continue to hide from the problem and let the fines build up, then you're only going to make things even worse.

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Learn from these celeb tax mistakes
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Late tax return bill will rise £10 a day from today

Many celebrities have gotten smacked down for failing to paying taxes. Wesley Snipes actually landed in prison for his $17 million unpaid tax bill, while Nicolas Cage owed a seven-figure amount to the IRS. A host of others, including Lindsay Lohan, Pamela Anderson, and Christina Ricci, have faced liens or tax bills for more modest -- yet still sizable -- sums.

The two main reasons for us ordinary folks getting stuck with a big tax bill are that your paycheck withholding needs changing or that you have outside income that comes without having taxes withheld. In either case, even if you can't afford to pay when the bill comes due, ignoring the problem will eventually land you in an even bigger heap of trouble. Instead, take advantage of IRS programs that let you make affordable installment payments over time.

Part of what put Wesley Snipes behind bars was his conviction on three counts of failing to file tax returns by their filing date. In part, he relied on a bogus theory that all income taxes are unconstitutional as justification for his actions.

But a much more common problem many people run into is that they can't afford to pay their tax bill right away. The mistake they often make is to assume that they shouldn't file a return at all if they can't pay.

In reality, the penalties for not filing your taxes are much more severe than if you file but can't pay your taxes all at once. So even if you don't have the money to send with your return, go ahead and file. It'll save you a ton of money -- and possibly jail time -- in the long run.

AccountingWEB recently took a look at some of the great swag that celebrities received at the Academy Awards. With sponsors handing out goodies including everything from jewelry to exotic safaris, the gift packages added up to as much as $75,000 in value. But the recipients have to report it all as taxable income.

You may never be so lucky, but even more modest prizes often get reported to the IRS. If you get a Form 1099 reporting the value of something you received as a prize or award, not including it on your tax form could trigger a red flag at the IRS.

One allegation that Nicolas Cage raised regarding his tax problems was that his business manager mishandled his funds and caused big losses that destroyed his finances. Similarly, Martin Scorsese and Al Pacino both blamed convicted adviser Kenneth Starr for their tax woes. Starr went to prison for fraud and theft from clients.

Still, no matter where you go or how much you spend for tax preparation, you bear final responsibility for making sure your tax returns are accurate. Reputable accountants will reimburse you for any penalties and interest that result from mistakes they make, but don't count on them.

Instead, make sure you understand the positions your tax pro takes so that you can defend them if a question arises.

As you look at the hijinks of your favorite celebrities, be sure not to make the same tax mistakes they made. With a little common sense and some planning, you can learn from celebrity mishaps the easy way.

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