February 2022
The beginning of each year brings the looming stress of filing your taxes. Sorting through all the paperwork, filling out the correct forms, and making sure everything is prepared and filed on time can be a challenge. What happens if you find yourself missing important tax deadlines? And more importantly, what can be done to correct the error?
What won’t happen
Every year, millions of American citizens miss major tax deadlines. While it’s always a smart move to file as soon as possible, the IRS knows that extenuating circumstances do exist. Although it’s natural to be nervous, it’s important to stay calm and know the facts. Missing deadlines doesn’t mean the IRS will be knocking on your front door or threatening to take your home away. The money you may owe will not be removed from any accounts without your knowledge or consent, and your finances and credit won’t be in any immediate danger.
The important thing to remember is not to panic before you completely understand the situation. You may have to pay penalty fees in the future, and continuing to fail at filing may result in financial and credit issues down the line, but until you know what you’re dealing with, stay calm until you can talk to someone, like a tax advisor, and find out what to do next.
What will happen
Assuming you’ve missed both the original tax deadlines and any extension dates you may have requested, expect to pay penalty fees to the IRS. These fees will vary depending on factors like your annual income and the length of time you wait to file. Rocky Mengle, writing for Kiplinger.com, states that the penalty is, “0.5% of the tax due for each month your return is late. If your return is more than 60 days late, the minimum penalty is $435… or the balance of the tax due on your return, whichever is smaller. The maximum penalty is 25%.” In addition to the failure-to-file penalty, you may also face a failure-to pay penalty if you fail to provide the IRS with the required fees. When combined with interest and other penalties, the amount of money you owe will increase drastically the longer you wait to file.
What you can do
While some form of penalty fee is inevitable after missing major deadlines, there are still several important things you can do to lessen the financial blow. First, file your taxes as soon as you’re able to do so. The longer you wait past the deadline, the higher any fees will be. Second, if your failure to file was due to a hardship or provable emergency, you may be granted an extra extension. According to TurboTax, if you’re a victim of a recent natural disaster, you will be given filing extensions. The IRS website also lists military service members and support personnel in combat zones as being eligible for more time to file. Finally, double check to make sure you’re not due a tax refund. If you are, then there’s no need to worry, since the IRS won’t charge you penalties for filing late if a refund is coming your way.
Now that you’re armed with the facts about missing tax deadlines, you’ll be better prepared for how to deal with the situation should it ever arise. Let us know if we can help. We may not be able to answer your questions directly, but we can refer to you to a tax advisor or someone who can help you navigate through the situation.