What Happens If You File Your Taxes Late?

Today is March 1st. And it’s a good bet you haven’t filed your taxes yet, despite having all the paperwork necessary. Sure, if your tax year ends on December 31st, the tax deadline for filing tax returns is usually April 15th every year. The IRS isn’t giving pandemic extensions this year, although because the 15th lands on both Good Friday and Passover, you do have until Monday, April 18th to file electronically, or have your envelopes postmarked.

That doesn’t mean this is a good time to procrastinate.

Filing Your Taxes Late

Filing your tax return late can be a costly task. Delayed submission may result in negligence penalties and a late payment penalty. Many taxpayers file their tax returns on time, but there is no need to postpone them until the very end. Early tax returns make sense for many reasons.

Starting the filing process early in the year will allow you to collect the evidence needed to claim all deductions and avoid the headache of highlighting numbers and receipts late at night.

Earlier in the season, your tax preparer has a more flexible schedule and may be able to start working immediately with your account.

The earlier you file, if you’re entitled to a refund, the sooner you have the money you loaned the government back in your pocket. The IRS doesn’t pay you interest.

But if you owe… Filing even just one day late will incur penalties and interest.

It is important to remember that paying your tax returns late has consequences. Each month you are late for tax payment, you will have to pay an additional 5% penalty on the total amount you owe. It is also important to note that one month does not mean 30 days for the IRS.

S ubmitting more than 60 days late makes things more complicated and more expensive.

If you cannot pay the total amount you owe at the time of filing, pay as much as you can and apply for a tax payments plan with the IRS.

Plenty of Penalties

Tax liabilities include things like a delinquency penalty. This penalty is not the same as the delayed penalty. Delayed submission penalties affect those who fail to submit tax forms and other important tax documents on time. Overdue fines affect those who are late in paying taxes.

Unpaid/delinquency taxes are paid at 0.5% of the monthly due taxes plus interest.

An unfilled penalty, also known as an undeclared penalty or a late filing penalty, is usually 5% of the tax payable monthly or part of a late return month.

When you file your tax returns two months after your tax deadline, the minimum penalty is 100% of your unpaid tax or $210, whichever amount is lower. The non-payment penalty is 0.5% of the balance of each month or part of the month for which tax is unpaid. According to the IRS, the maximum penalty is 25% for any income tax returns delayed two or more months.

However, you may not be penalized if you have a sufficient explanation for the delay in submission. Include statements with your Return, explaining why there is a delay.

Filing For An Extension

If you missed the deadline, you can apply to the IRS for an extension of your tax return.

But extensions aren’t just those waiting at the last minute to submit their files. There are various reasons why submitting a tax extension could benefit those who need it. Acquiring an extension is easy and free.

You can apply for a tax extension correctly by filling out the IRS Tax Form 7004 (for business tax returns) or IRS Tax Form 4868 (for individual tax returns). You can sign up for any reason whatsoever, and often compromise happens automatically.

However, some taxpayers who have requested a “compromise” on their previous filing deadline must submit it during the five-year trial period by the April deadline. If not submitted by the April deadline, the IRS may withdraw the offer and reinstate the original unpaid amount.

Renewal will give you a longer deadline for return submission, but you are still responsible to pay what you owe. Extensions reduce penalties and help you find additional deductions, but the unpaid amount is still subject to delinquency penalties (0.5% per month) and interest (currently 3% per annum).

As soon as you apply for an extension, you will be automatically extended for six months from your original registration deadline – moving your return deadline to October.

What If You Don’t Ask For An Extension?

If you have not applied for an extension of time and expect to pay the IRS, the agency will collect unsubmitted and fine non-payment fees after the tax deadline. If you do not submit a penalty or default penalty, it will be 5% per month (or part of the month). The upper limit is 25%.

60 days after the tax date, even if you only owe $1, the IRS will impose a fine of at least $135.

Getting A Refund?

Tax refunds are a cause for celebration. However, in practice, it often means that you have made the mistake of paying more income tax returns than you need. The state or federal government will refund any surplus paid.

Avoid overpayments by correctly filling out employee tax forms and estimating or updating your deductions more accurately. If you work for an employer, have them adjust your withholding on your W4.

You will receive a tax refund if you overpay your estimated tax amount if you are self-employed. You might think of this extra income as free money, but in reality, it’s a loan to the IRS for NO interest!

You Have A Balance Due?

The unpaid balance is a tax obligation to be paid to the government.

You have some payment options:

• Installment payment plan
• Electronic cash withdrawal
• Debit or credit card
• Direct payment

In The End, What Happens If I Don’t Pay My Taxes?

Failure to file your tax return by the due date may result in additional fines interest from the due date. Non-payment is also punishable by law.

A deliberate attempt to evade tax under Section 7201 of the Internal Revenue Code leads to a fine of $250,000 or jail time, not exceeding five ears. For most tax evasion violations, the government has a deadline to file a criminal complaint against you.

If the IRS wishes to prosecute tax evasion or related charges, it usually must be prosecuted within six years of the due date of the unpaid tax return.