Posted on April 26, 2017 in General
If you find that you have inadvertently missed the filing deadline for your taxes or you simply haven’t managed to get your figures complete in time, don’t panic! While it’s never a good idea to delay filing and there are penalties in place to discourage you from doing just this, there are various options available to you in order to mitigate any further problems and penalties after late filing, if you know how to go about it.
This blog post will provide details on what may happen if you are late in submitting your 2016 personal taxes, share some advice on how to proceed if you have already missed the deadline, and what you can expect from there.
First of all, it is really important to file your tax return on time where possible, or as soon as you can-even if you are not able to pay your tax immediately. This is because the penalty for failing to file your return is ten times higher than the penalty for filing but failing to pay. It is of course vital to minimize any fees or penalties as much as possible in order to avoid worsening your situation further.
If you really cannot make the filing deadline or you have already missed it, the first thing you should do is apply for an automatic six-month extension, by requesting and returning form 4868 from the IRS.
Even if you cannot fill in your return with an exact income figure, making an estimate (overestimating if necessary rather than underestimating, as any excess can be refunded later on if you find yourself to have over-paid) is better than failing to file at all, or filing late if this can be avoided. If you fail to submit a return at all, the IRS will simply create a substitute return for you, which is likely to be wildly inaccurate and often, much higher than the true figure you owe.
Below you will find frequently asked questions for individuals who are late to file their personal taxes in 2016:
If you file late or don’t file a return at all the IRS may well hit you with a penalty, and the same is true if you file your return on time but do not pay on time. If you are already late to file or know that you cannot avoid filing late, it is wise to get a handle on the type of money you may be looking at in terms of penalties and charges.
The late filing penalty is usually 5% of the value of your unpaid taxes, calculated monthly or per part of each month that your return is late. However, this amount is capped and cannot exceed more than 25% of the total value of your unpaid taxes. The late payment penalty, assuming that you filed on time, varies between 0.5% and 1% of your owed taxes, again calculated monthly or per part of each month that the taxes remain unpaid.
If you both fail to file and fail to pay, however, the total value of the penalty is capped at 5% of the unpaid total per month, and so is not cumulative. Additionally, if your return is filed more than 60 days late, the minimum penalty threshold is $135 or 100% of the tax owed, whichever is the lesser.
If you have already missed the filing deadline, it is important to submit a return as soon as possible, in order to avoid accumulating further penalties and charges for every additional month that you are late. Request an extension of your return as soon as you can-before the due date if you know that you will need to file late-and as mentioned above, don’t be afraid to estimate if you have to, rather than failing to file a return at all.
If necessary, you can request an extension of up to six months to allow you to submit your late return with no penalty, and the good news is that this extension is approved automatically and costs nothing, giving you an additional six months of leeway to play with.
Additionally, if you can demonstrate a reasonable reason for your failure to file on time, you may be excused from the late filing (or payment) penalties, and so this is definitely worthy of consideration if you think that your situation may fulfill these criteria.
Theoretically, every person in America should be able to file their own tax return and manage any anomalies or issues that may arise to potentially prevent this, but the red tape and small print surrounding anything out-of-the-norm where the IRS is concerned can be daunting and confusing for the average Joe.
If you have missed the filing deadline and are concerned about how to proceed, we recommend you contact your preferred tax professional. In some circumstances you may need to retain an attorney, depending on the complexity and specifics of your situation.
If you need tax help or need to better understand your options, contact Walker Law and our staff can refer you to a trusted tax professional in our network.