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As the tax filing deadline passes, many individuals find themselves in the position of being late filers. Whether due to unforeseen circumstances or simply procrastination, missing the tax deadline can bring a sense of unease and uncertainty. However, all is not lost for those in this situation.
If you’re ready to get on the other side of late tax filing, you’ve come to the right place. Keep reading for key considerations for late filers, offering guidance on what steps to take and how to navigate the aftermath. From understanding potential penalties to exploring options for filing late, we’re here to help you get back on track.
1. File your taxes as soon as possible.
Even if you missed the deadline, it’s important to file your taxes as soon as possible to avoid further penalties. The longer you wait, the more penalties and interest you may accrue.
“Filing soon is very important because the late-filing and late-payment penalties and interest on unpaid taxes add up quickly,” the IRS shared. “However, in some cases, a taxpayer filing after the deadline may qualify for penalty relief. For those charged a penalty, they may contact the IRS by calling the number on their notice and explain why they couldn’t file and pay on time.”
2. Consider an extension for your taxes.
If you couldn’t file your taxes on time due to extenuating circumstances, you may qualify for an extension. For instance, if you experienced a natural disaster or a personal emergency, the IRS may grant you additional time to file your taxes without penalties. You can typically request an extension by filing Form 4868.
“If you are self-employed, an extension will grant you additional time to come up with funds to maximize your pension savings or to fund pension contributions for your employees, which can lower your tax liability,” per advisors at Marcum LLP.
3. There are penalties for late filing and payment.
Be mindful that there are penalties for late filers. The penalty is usually a percentage of the unpaid taxes owed and can increase the longer you delay. For example, the penalty for filing late is usually 5% of the unpaid taxes for each month or part of a month that your return is late, and the maximum is steep — up to 25%.
But that’s not all! If you owe taxes, there are penalties for late payment—typically 0.5% of the unpaid taxes for each month or part of a month when the taxes remain unpaid. Much like penalties for filing late, this fee can max out at 25%. However, there’s a caveat. If you filed an extension and paid at least 90% of your actual tax liability by the original due date, you may dodge a late payment penalty altogether.
4. Always communicate with the IRS.
If you’re facing challenges that prevent you from filing or paying your taxes on time, it’s essential to communicate with the IRS. Ignoring the issue will only lead to more significant problems. You can contact the IRS by phone or mail to discuss your situation and explore possible solutions, such as penalty abatement or setting up an installment plan.
An installment plan, for example, allows you to pay off your tax debt over time in monthly installments. Keep in mind that there may be fees associated with setting up an installment plan, and interest will continue to accrue on the unpaid balance.
Remember, while the aforementioned tips can offer quick assistance, if your situation is more complex, it’s crucial to seek guidance from a tax professional. An advisor can also provide tailored advice based on your circumstances.