If you want to know what happens if you file taxes late, then know the important questions and the practical answers.
In this article:
- When Are We Supposed to File Taxes?
- Can I Still File My Taxes After the Deadline?
- What Happens If You File Taxes a Day Late?
- What Happens If You Pay Your Taxes Late?
- How Much Does It Cost to File Taxes Late?
- Can You Still Get a Tax Refund If You File Late?
- When Is the Failure-to-File Penalty Applicable?
- How About the Failure-to-Pay Penalty?
- How to File Back Taxes Without Records?
What Happens If You File Taxes Late?
When Are We Supposed to File Taxes?
The deadline for filing of taxes is always the 15th of April each year. The law provides an exception, though. If the 15th is a weekend or a holiday, then the deadline is moved to the next business day.
However, just because the period for filing taxes is still far away does not mean you can be complacent. Prepare early for tax season. It can take around 12 to 13 hours for most taxpayers to finish the whole tax filing process, according to the IRS Estimated Average Taxpayer Burden.
On the other hand, filing too early can lead to some complications. Some taxpayers may need to submit important tax credits, like the additional child tax credit, that may require review. Also, changes to civil status, like marriage, can have effects.
A recommended time to file taxes is around the last week of February to the first week of March. This timeframe is when the IRS has finished reviewing those who have filed for additional exemptions and credits.
Can I Still File My Taxes After the Deadline?
Yes, you can still file after the deadline. However, you will incur two penalties. The IRS levies a failure-to-file penalty, which is 5% of unpaid taxes every month, and an inability to pay penalty, which amounts to .5% of total delinquent taxes.
As you can see, paying taxes late is actually cheaper than filing taxes late. A good way to save money from penalties is to ask the IRS to give you a tax extension. You can easily register for an extension with their e-file system. The IRS has tax extension guidelines for those who want to file for an extended filing period. Tax filing extension is usually six months. The extension goes a bit beyond that for the likes of military personnel in active duty.
What Happens If You File Taxes a Day Late?
Late taxpayers will have to pay for penalty and interest. The interest rate for unpaid taxes is 3% plus the short-term federal rate, according to the IRS penalties guidelines.
The IRS caps the monthly interest to 5%, even if you have both penalties to pay. So, if you paid and filed your taxes on April 16 when the deadline is April 15, then you have to pay 5% as additional fees, both from the failure-to-file and failure-to-pay penalty, plus interest.
However, the IRS does have some provisions to help taxpayers. For instance, there is a minimum and maximum amount for the failure-to-file penalty. The penalty has a cap of 25% of the unpaid taxes. Also, for those who filed over 60 days late, the IRS will levy the penalty with the lesser amount between $205 or 100% of the tax owed.
What Happens If You Pay Your Taxes Late?
Other than penalties and fees, filing taxes late can have other unwanted effects. If you have not filed your taxes for three years or more, the IRS can add a tax lien. The tax lien can lead not only to lower net worth but also to a decreased credit score.
Your properties will get a lien and loans will be harder to acquire. Unpaid taxes will also apply to your tax refunds first, so you may receive a lower tax refund if you still have some dollars left. You do not pay any penalties unless the unpaid taxes are higher than the tax refund.
How Much Does It Cost to File Taxes Late?
Technically speaking, you don’t have to pay anything by filing electronically. There may be some small amounts for postage and delivery if you go the paper route. What you should be wary of are the stiff penalties and interest levied against the taxpayer.
Remember the list of tax deductions available for you to lower your taxes legally? Well, the IRS can file your taxes for you and conveniently leave out all those benefits. That means more unpaid taxes and bigger penalties.
Can You Still Get a Tax Refund If You File Late?
Taxpayers can still get their tax refunds even if they file their taxes late. Of course, this situation assumes you still have some extra cash remaining after taxes. You do not owe any penalties if your refund is higher than your unpaid taxes.
However, to receive the tax refund, you must file your taxes. If you do not need to file taxes, then advise the IRS that you are not required to do so. However, if you are legally required, then ask for a tax extension to minimize penalties. Different taxpayers looking for their tax refund have different schedules, so always research and prepare ahead of time.
When Is the Failure-to-File Penalty Applicable?
The failure-to-file penalty already applies on the business day after the deadline. Do remember if you filed after 60 days, the minimum is $205 or 100% of unpaid taxes, whichever is lower. This does not include other penalties like the interest and failure-t0-pay penalty.
Also, do note the application of the penalty. For example, let us say that the deadline is April 15 and you filed on August 3. You have not filed for a tax extension. The taxpayer gets the maximum 25% of unpaid taxes as the penalty. Even if you did not reach the total 150 days, you get the maximum cap. The IRS follows months and not calendar days.
How About the Failure-to-Pay Penalty?
Like the failure-to-file penalty, the failure-to-pay penalty already applies on the business day after the deadline. The failure-to-pay rate is much lower compared to the failure-to-file penalty, with the former only at .5% per month compared to the latter at 5% per month.
How to File Back Taxes Without Records?
Sometimes, taxpayers simply lose their records or are uncertain of their standing regarding taxes. You can call the IRS for more help at (1-800-829-1040). You can reach out to them and, using your Social Security Number, get information pertaining to your tax return status.
Of course, you can ask the IRS for your tax transcripts. These records are actually free and help you prepare your tax returns. Getting a transcript is pretty easy using the Electronic Get Transcript function in the IRS. Just prepare your Social Security Number, date of birth, filing status, and mailing address.
Taxes can be quite a headache if not prepared appropriately. Filing and paying taxes late can incur penalties and interest, so better prepare as early as now. Tax extensions can only do so much.
Have you prepared your taxes? How did you file your taxes before? Do you have any questions about the tax filing process? Let us discuss in the comments section below.