If You Miss The Tax Deadline This Is What Happens
Have you ever wondered what would happen if you didn’t file your taxes? Or what would happen if you were a few days late? The answer could be cause for anything from a major concern to a simple shrug depending on several factors. Here’s what will happen if you miss the tax deadline in April.
If You Owe Taxes
If you owe taxes and do not file by the April 15th deadline, you may face several tax penalties. Not only that, but any tax you owe begins accruing interest after this point. For every consecutive day late, you will owe a little more than the last. Therefore, it is critically important that you don’t put it off so that you won’t owe more than you should.
Additionally, if you wait until after the deadline, you won’t be able to file an extension. Should you know ahead of time that you won’t meet the tax deadline, you should request a payment extension so that your fees and interest will be reduced. You can do this for up to 60-120 days after the deadline. But if you wait until the deadline to consider this, you will no longer be considered eligible.
First, you will be charged two penalties: the failure-to-file penalty and the failure-to-pay penalty. You can still file at any time, and you should do it ASAP: the sooner you file, the less you’ll pay. For every day it’s put off, the more you will owe. After 60 days pass, you will reach the established minimum penalty, which can be up to 100% of the taxes you owe, provided that that amount is below an annually established dollar amount.
The failure-to-file penalty is 5% of the taxes you owe and is charged monthly. If you file within 30 days, you will still be charged a penalty for the whole month. After 60 days, you will be charged a minimum penalty, which is the lesser of 100% of your taxes owed or the dollar amount set by the IRS. The failure-to-pay penalty is 0.5% of your owed taxes and is typically applied every month until you either pay off your debt or charge 25% of what you owe in taxes.
If you file after the deadline for a just cause, you may qualify for penalty relief. To determine if you qualify for this, you should call the number on your notice and ask if you qualify; typically, they will ask you why you were unable to pay in time.
Depending on your reason, you may qualify for this penalty relief. Reasonable causes may include natural disasters, death or illness in the immediate family, or proof of reasonable attempts to file your taxes on time that fell through.
It is important always to ask, as you may be able to have your penalty fees waived, saving you as much money as possible. However, lying about your grandmother passing away might work at school, but it won’t work on the IRS. They often require documented records such as hospital records, court documents, photographs, and other proof forms. Being caught lying by the IRS will only make it less likely for them to help you in the future.
If you have a long history of paying your taxes on time, you may qualify for administrative penalty relief. If you have paid your taxes on time within the past three years and meet other requirements, you may be able to have your first penalty fees waived.
If You Don’t Owe Taxes
If you don’t owe any taxes or a refund is due, there is no penalty for late filing. Your funds will be held for up to three years until you claim them. However, if you never claim them, they’ll return to become the United States’ property, and after that point, you won’t be able to get them back.
If You Didn’t File Because You Can’t Pay
According to the IRS, if you didn’t file because you couldn’t pay, don’t panic. The IRS highly recommends going ahead and filing your taxes anyway. You aren’t slick or hiding something if you don’t; just because you didn’t file doesn’t mean the IRS doesn’t know you owe taxes.
If you were reported on an employer’s taxes or deposited money into your bank account, they know exactly how much you owe. By going ahead and filing your taxes and paying off whatever you can afford, you avoid paying even more in penalties.
Not only will you avoid the failure-to-file penalty, which is the larger of the two, but you will pay less in interest and on your failure-to-pay penalty because it is only 0.5% of your owed taxes.
Additionally, if you are proactive about filing anyway and contacting the IRS, they will likely be more than happy to work with you. Call the IRS at the number provided on their website, and they will be able to work with you on your payment options or even possibly offer a payment extension of up to 120 days.
Essentially, don’t put off filing your taxes this year. You’re either going to be digging yourself an even deeper hole or missing out on money that you worked hard to earn. If you can’t pay your taxes, don’t worry; the IRS has options for you.