Learn about tax penalties for late filings.
Find out how long you have to file for a refund.
Find out what happens if you don’t file a return.
If you can’t pay the balance owed by the extension deadline, what happens next?
We’ve all been there. Life is super busy. We have to take care of our families and friends, work obligations, and all our other everyday responsibilities. With all of the hustle and bustle, you realize that the October 15th tax extension deadline has passed and, unfortunately, you still haven’t filed. What should you do now?
Fiducial has a breakdown of what happens when the tax extension deadline passes and the next steps you should take.
Will I be penalized for filing after the tax extension deadline?
Yes, if you missed the October 15th tax extension deadline, you can be penalized. The IRS allowed you an additional six-month extension of time to file your taxes (from April 15th to October 15). That was not an extension to pay taxes, only an extension to complete your return.
In addition to any interest and penalties that you may owe as a result of failing to file (and pay) your tax on time, you will now be subject to a late filing fee on any unpaid taxes. The penalty, which includes interest, is generally 5% per month of any unpaid balance for up to 5 months. This penalty can increase to up to 25% of the remaining balance owed. To make matters worse, the interest continues to accrue until you pay your liability.
If you file your taxes more than 60 days late, you may receive an additional penalty of $435. That is the minimum late filing penalty which is the lesser of what you owe in taxes or the $435. So, it’s important to go ahead and file even if you can’t pay the outstanding balance in full and work with the IRS to create a payment arrangement. More about that a little later. Even if you are missing some information you need to file, you can file now and amend later when the information becomes available.
What happens if the IRS owes me a refund?
Think the IRS owes you a refund? You have three years from the original due date of the return in order to file and claim your refund. However, if you wait too long you will forfeit any refund you might be entitled.
Are you filing your tax return after the October 15th deadline and do not owe any tax? Then there are no late filing penalties or interest.
What happens if I don’t file my return?
If you don’t file your tax return with the IRS, they will likely create a substitute return on your behalf based on income data such as W-2s, 1099s, and other documentation provided to them by your employer and other financial institutions.
It’s important to understand that this substitute return will not include any calculations for credits and deductions that you may qualify for. Consequently, it is likely that the substitute return will result in a higher balance owed and penalties than if you prepared your own return.
What happens if I can’t pay the tax balance owed by the tax extension deadline?
If you can’t pay your tax obligations with the IRS, it is important to go ahead and get the tax return filed and then work with the Internal Revenue Service in order to set up a payment plan.
The IRS’ Fresh Start Program allows taxpayers with balances of less than $25,000 to set up a monthly installment plan, allowing you to make payments on your balance over a number of years.
For those experiencing more financial difficulty, there is an “Offer In Compromise” option that allows you to settle your tax debt for less than the amount owed.
The interest and penalties for filing your tax return after the final tax deadline can be severe. It is important to get your return filed. Do not delay, even if you need to make arrangements to pay the balance owed to the IRS.
Have questions about steps you should take if the October 15th tax extension deadline has passed you by? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations. Ready to book an appointment now? Click here. Know someone who might need our services? We love referrals!
For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.