Tax season has a tendency to sneak up on all of us. Even though we’re aware that there’s a deadline, many of us put off the dreaded tax day until the last minute. What happens if you run out of time? Can you file taxes late?
While you should always try to file taxes on time, millions of people file taxes late every year. We’ll explain exactly what happens if you aren’t able to file your taxes on time, and what you can do to rectify the situation if you find yourself behind on your taxes. Geaux Tax Resolution is here to help.
WHEN IS THE DEADLINE FOR FILING TAXES?
The first thing to know is when your tax filing deadline is. In normal years, this is always on April 15th, however, due to the extraordinary circumstances of 2020, the IRS pushed the date back to June 15th, and then later to July 15th. Filing before this date will save you from late filing penalties.
The filing deadline is also the same as the payment deadline. You can file without paying, however you may incur fees, which we’ll explain in a moment. So, can you file taxes late?
CAN YOU FILE TAXES LATE?
Yes, you can file your taxes after the deadline. The IRS always wants its money, and will not lock you out of the system or prevent you from filing after the deadline. In fact, it’s entirely possible to file tax returns even years late. However, and we must emphasize this, always try to file on time! Filing late opens up a can of worms that can create headaches for you later.
Let’s take a look at the consequences of filing late and how you can avoid them if you find yourself running up against the deadline.
What Happens When You File Taxes Late?
With regard to income tax returns, the answer depends on your tax situation. In particular, whether you owe the IRS or not matters. Late filing can subject you to penalties and fees if you owe, however, if you aren’t in the red, you might not suffer any major consequences. Let’s take a closer look.
Do you Owe?
The good news is that if you do not owe any money to the IRS, or are expecting a refund, then there is really no penalty for filing your taxes late. So, can you file taxes late if you are expecting a refund? That all depends on how quickly you want your money. The IRS does not mind holding on to your cash for a while.
However, if you owe money to the IRS, then filing late will have direct consequences. Let’s start with the fees that the IRS imposes.
Fees Imposed by the IRS
According to Internal Revenue Code §6651(a)(1), failure to file penalties of 5% of the unpaid amount will be assessed. If you owe the IRS $1000, then expect an additional $50 charge for failing to file on time.
The longer you wait, the worse it gets. If you are more than 60 days late in filing, then you will pay the lesser of two amounts: 100% of the tax you haven’t paid or $435 (for returns due in 2020). Considering the same example of a $1000 debt, you would now be looking at $485 in extra fees simply for filing late.
To sum up, it’s always better to file on time and pay later. Don’t be afraid to tell the IRS how much you owe, even if you don’t have the money to pay today. The interest payments are far more manageable than the filing fees, so let’s look at those.
If you have not paid your taxes by the deadline, then you’re going to owe the IRS 0.5% of the tax bill for each month that it goes unpaid. Going back to our example of $1000, this would only be $5 a month. Note that this is charged even if the month is incomplete.
It’s possible to reduce that percentage to 0.25% if you have filed on time. This is why it is so important not to file late! The IRS treats punctual filers much better than late ones. You can make an arrangement to pay your taxes late if you file on time, and the IRS will go easy on you.
Criminal Failure to File Charges
Many people ask us if it is a crime not to file taxes or if they can go to jail for tax debt. Fortunately, the answer is generally no. However, if you consistently refuse to file or seem to be avoiding your taxes altogether, the IRS can place liens on property or even paychecks. They can use criminal charges to justify this action in court.
This is only reserved for exceptional cases, and if you’re just a couple of months behind, you shouldn’t worry. Now let’s look at cases where you can ignore the deadline or get an extension to buy yourself more time to file and pay.
Exceptions to the Deadline
The IRS has made some allowances for individuals to file later than normal. The official form to file for an extension is the Form 4868, and if you send this to the IRS before the tax deadline, you may receive an extension. This extension will delay the failure to file fees we discussed earlier, however you will start to receive interest penalties on the amount you owe.
The IRS can still refuse your request for an extension if they feel that your tax amount is high and you may be trying to avoid taxes. However, most cases are approved.
Living Out of the Country
Form 4868 also gives special consideration to American citizens abroad. If you are living outside of the US when tax day comes around, you can file for an extension and get another 2 months. Like any other extension, interest will still apply, but failure to file fees will not. This also applies to military members stationed overseas.
This is one of the rare cases of the IRS being exceptionally nice. Americans abroad can apply for the Foreign Income Exclusion, which excludes a significant amount of foreign income from your tax bill. However, to get this, you need to have a full year of living abroad. If you find yourself short by a month or so, you can actually file the extension and then legally request the exemption.
CAN YOU FILE TAXES LATE IF YOU ARE SELF-EMPLOYED?
Self-employed income, along with other income like capital gains, is subject to estimated tax payments. These follow a quarterly schedule, and you should make payments if you expect your tax bill to be at least $1,000.
In these cases, you still need to file by the deadline, but you should be making estimated payments before the deadline. Annualize your income to get a good idea of how much you should pay, and remember that if you overpay you can always get the money back.
WHAT SHOULD I DO IF MY TAXES ARE LATE?
If your taxes are behind schedule, don’t wait until the IRS gets angry. Call Geaux Tax Resolution LLC of Lafayette, Louisiana. We’ll get your taxes back on track and save you from serious trouble.