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What Are The Consequences of Missing the Deadline for Filing Your Tax Return?

If you cannot submit your taxes by the due date or the deadline for a tax extension, you may be subject to a failure-to-file penalty imposed by the Internal Revenue Service. For each month or portion of a month that your tax return is not submitted, the IRS charges 5% of your taxes due, and the penalty is proportional to the amount of your unpaid taxes. But the IRS can only set you up to 25% of your taxes. 

You should know that the IRS will not penalize you for filing your taxes late if you anticipate receiving a refund but have not yet done so. Seek the advice of a CPA in Brooklyn, NY, before submitting your return if you anticipate being subject to late filing penalties. Interest and fines on top of that could be on you.

Additional Repercussions of Ignoring a Tax Due Date

Not paying your taxes by the due date could result in more than just penalties and interest. Filing your taxes could be a hassle, but the IRS offers a service they call “substitute for return” (SFR). Having the IRS submit your return might sound like an easy option, but it has some drawbacks.

Make a Large Payment to Minimize Penalties If You Owe

If you anticipate receiving a refund, there is typically no financial consequence for submitting your taxes after the deadline. However, if you have an outstanding tax liability, the IRS may impose penalties.

It is still recommended to promptly pay the full outstanding balance, irrespective of whether the deadline has expired. Doing so can mitigate the consequences of fines and interest, such as the penalty for not paying or filing your taxes on your tax account.

If you file your tax return after the original due date (not the date of the tax extension), you may incur a failure-to-file penalty for any unpaid taxes. If you have subtracted the amount of taxes withheld, made payments for estimated taxes, and utilized any refundable credits from the total tax amount that should have been declared on your tax return, then you currently have outstanding tax liabilities.

For every month (or portion thereof) the return is overdue, the Internal Revenue Service determines the failure-to-file penalty as five percent of the outstanding taxes. But the penalty can not be more than 25% of your tax debt.

Failure to pay taxes reported on your return by the due date or an allowed extended deadline (e.g., for a federally declared disaster) may also result in a failure-to-pay penalty. A failure-to-pay liability of 0.5% per month for outstanding taxes for at least one month.

When there is a failure-to-file penalty and a failure-to-pay penalty in the same month, the failure-to-file sentence will be reduced by 0.5%. Therefore, the monthly failure-to-file penalty will be 4.5% rather than 5%.

What Happens If My Tax Deficit Persists?

Paying promptly is usually preferable, but there may be times when you cannot do so. When full payment is not possible, we offer several alternative payment plans.

Plans for making a quick payment. Full payment is due within 180 days if you meet the criteria. Interest and penalties may accrue until your taxes are paid in full, but there is no price to ask for this payment option. You can apply online if the total amount you owe, interest included, is less than $100,000. The IRS offers an online payment agreement application that can be used to establish a payment plan.

Agreements for monthly installments. You can pay your taxes in monthly installments using these programs, also called long-term payment plans. Online installment agreements are available to those below $50,000 (not including interest and penalties). Prices for online setup vary between $31 and $130. The fee could not apply to you, depending on your income.

Collection delayed temporarily. If you cannot pay your tax burden immediately, the IRS can temporarily postpone collecting it. To seek this remedy, you might be required to fill out a “Collection Information Statement” (Form 433-F). Additionally, we need evidence of your financial situation. Remember that penalties and interest will add to the total amount you owe.