What Happens If you File Taxes Late? | Ontko LLC
Hey life happens, even to the best of us. At times, those federal income tax deadlines may pass us right by. Unfortunately, filing income tax returns is something many people put off even when life is on track. What you may not realize is that knowingly not filing taxes or filing taxes late despite knowing there is a requirement to file is not only illegal, but will attract stiff fines and penalties for the taxes due and if you are due a refund, you risk losing your refund depending on how late you file.
Here are four commonly used reasons for filing tax returns late or for not filing at all. Some of the reasons may hold weight with the IRS whereas others have no validity with the authorities.
Divorce is difficult and it can be quite confusing as you are left to deal with a new tax situation along with the implications of that life change. Confusion may also stem from disputes over who is going to pay for what taxes and who claims the children. Amidst all the chaos, it is understandable that filing your tax returns may be the last thing on your mind. However, this is not an excuse with the IRS, and you will still be accessed interest, failure to pay and failure to file penalties on any tax due.
After filing for bankruptcy, many people have no idea how to file their next tax returns or when to file. Confusion for taxpayers in bankruptcy is caused by the need for some to file two tax forms, their individual and now one for the bankruptcy estate. To avoid attracting penalties for late filing, consider filing for an extension to give you more time to understand the bankruptcy filing process. You may also have received 1099-C tax forms for forgiveness of debt that may or may not be taxable. You will need to know how to determine if that forgiveness of debt from bankruptcy is taxable income to you.
Ignoring the IRS
Every year, many late filers and filers who choose not to file use ignorance as a reason for late or not filing. Unfortunately, ignorance is not an excuse with the IRS, and it will not excuse you from your responsibility. The IRS assumes that as a sovereign citizen, you understand your tax obligations and will report your financial information in a lawful and timely manner.
Fear Due to Forgetting to File
Forgetfulness is a common human trait. In this case, it applies when you were willing to file, but the due date, unfortunately, slips your mind. Forgetting is not an acceptable reason for the IRS and it may sure make you fearful – but do not be. If you forget to file and have a pending tax refund or Earned Income tax credit, you will not be charged with a failure to file penalty. However, you could lose your tax refund or credit if you do not file a return claim within three years of the return’s due date. If you do owe taxes but cannot pay the full amount at one time, you may be able to enter into an installment agreement with the IRS. You may want to contact us for help setting up an installment agreement with the IRS or State.
Frequently Asked Questions on Filing Returns Late
What to Do if You Missed the Tax Filing Deadline?
Complete your income tax return as soon as possible as you normally would and enter your income, deductions and other tax reporting forms the same way you typically would do.
The main difference when filing late is that if you owe taxes, you will be assessed interest and failure to pay penalties from the original due date of the return. In addition, if you did not file for an extension you will also be assessed failure to file penalties. Depending on your circumstance there could be other penalties as well. Give us a call if you need help filing your late tax return.
Is There a Penalty If I Failed to File for an Extension?
Yes, there may be a penalty if you did not file for an extension and you owe tax. The penalty is usually 5% of your unpaid tax from the original due date for each delinquent month up to a maximum of 25%. Interest is also charged on the delinquent balance of any unpaid tax.
What Is a First-time Tax Penalty Abatement?
A first-time tax penalty abatement is an administrative relief that you can request from the IRS for an assessed penalty if it is the first time you have been assessed that penalty. In addition, with a reasonable cause such as the death of a family member, illness, or divorce, you may qualify for other penalty abatements as well.
Are There Installment Options for Late Filers?
Yes. After you file your returns and your tax has been assessed, you can request an installment agreement with the IRS in which you can pick either a short-term or a long-term contract to pay the back taxes. Depending on how much you owe, completing the proper forms can be extensive. You may also end up with a lien on your home if you do not meet certain requirements. Give us a call if you think you may need to request a payment plan.
How Do I Pay My Penalties and Taxes?
There are several acceptable payment options to pay your taxes when you file your tax returns. Acceptable ways to pay your taxes include check, debit, or credit card payments, as well as direct withdrawals from your account.
Being late in filing your tax returns can be scary and frustrating, but you do have options if you find yourself in this situation. The first thing is to get those tax returns filed quickly and avoid additional interest and penalties. You may also need a tax professional to help navigate you through the complex IRS procedures, to guide you with paying penalties, to negotiate payment agreements, to limit the penalties, interest and the amount of tax you may actually owe, and to fix many other problems associated with late returns.
Contact Ontko, LLC in Frederick, MD, if you are late filing your returns or need help resolving other federal tax return issues.