May 23, 2019 | Posted in:

What to Do When You Forgot to File Taxes

April 15th came and went without filing your tax return. Now what?

It is easy to put off filing your taxes. Life is a jam packed with places to be and things to do. Finding time to organize your tax information and complete your return may seem hard. It is not terribly hard to find reasons to procrastinate all kinds of things you need to do, including filing your taxes.

If you wait too long and miss the April deadline, you may wonder if you should just skip filing altogether. However, if you owe money to the IRS, filing your tax return late (or never) can come with costly complications.

Penalties and Interest if You Owe Taxes

If you do not file your taxes with the IRS by the deadline there can be several tax penalties which will cause you to pay even more money to the government. So even if you cannot pay the full amount at once, you should still file your return on time.

In addition to interest charged on the amount you owe, you could be facing separate penalties for both filing and paying late. The late-filing penalty is 5% of the tax due for each month (or part of a month) your return is late. If your return is more than 60 days late, the minimum penalty is $210 or the balance of the tax due on your return, whichever is smaller. The maximum penalty is 25%. The late-payment penalty is 0.5% of the unpaid balance for each month (or part of a month) the tax is not paid. It can be as high as 25% of the unpaid tax. As you can see, the longer you wait, the higher the penalties grow.

Penalty Waiver Under Certain Circumstances

If you have a good explanation for missing the filling or payment deadline, you might be able to avoid the penalty (but not interest). What is a good reason? Think fire, natural disaster, serious illness and the like. A lack of funds, in and of itself, is not a sufficient reason for failing to file or pay on time. If you want to request penalty waiver, attach a statement to your return fully explaining reason for filing or paying late.

What Happens If You Are Due a Refund?

If you are confident you do not owe money to IRS, then there is less of  a reason to worry. The IRS does not penalize taxpayers for filing a late return if they are due a refund. Keep in mind that, if the government owes you, you will lose your refund if you do not file within 3 years of the April tax filing deadline. This means that for tax year 2018 returns, you will need to file by April 14, 2022 to claim your refund (October 15, 2022 if you filed an extension).

The IRS may be large and sometimes slow, but the agency has one thing on its side: information. An incredible amount of information is fed into IRS computers every year and there is a good chance some of that information concerns you.

For example, each year employer sends a copy of your W-2 to the IRS. The agency then waits, expecting a tax return from you based on your wages indicated on that W-2. In addition, banks, investment companies and businesses send Forms MISC-1099 to the IRS to report various types of income you received throughout the year. If you sell real estate, the IRS receives a form showing how much you received from the sale.

It may take the IRS some time to match your income up with your tax return, but eventually they will. If you did not file your return, they will figure that out, too.

What if You Can’t Pay Your Tax Bill?

If you are expecting a tax bill that you cannot afford this year, the worst thing you can do is ignore it. The longer you wait to pay your delinquent taxes, the larger the interest and charges will be. The IRS may be open to a tax settlement, but you have to communicate with them in order to make this happen. So file your return no matter what, and talk to a tax professional about what to do next if needed.


Author: Valentina Efremova


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