Tax Day is right around the corner, and if you have already filed your taxes, that means you can relax – tax season is over until next year! But if you didn’t file your taxes or didn’t file a tax extension, then this article is for you! Let’s take a look at what happens if you missed the tax deadline, how you can file an extension, what happens when you don’t file your taxes and you owe money (penalties and fees!), and available options if you can’t pay your taxes.
Avoid Missing the Tax Deadline if Possible
Let’s start with the most common situation, and the easiest to avoid – missing the deadline to file taxes. There are many reasons you may not be ready to file your taxes yet – including waiting on forms or financial information, big life events, travel, etc. The reason doesn’t matter too much, as long as you take action. If you think you might miss the tax deadline, then you should immediately file for a tax extension. It’s free and easy.
How to file for a tax deadline extension. Everyone is eligible for an automatic tax deadline extension and the first thing you should do if you missed the tax filing deadline is file for an extension with the IRS. This gives you until October 15th to file your taxes. However, you should also know that if you owe the IRS money, it is due on April 15th. So even if you file for a tax deadline extension, you need to send in an estimate of the taxes you owe. Failure to do so can result in fines or penalties. (There are no penalties or fees for not filing for an extension if you don’t owe the IRS any money).
You can file for a free tax deadline extension through these means:
- TurboTax Online.
- H&R Block @Home.
- IRS Free File Fillable Forms.
- Download Tax Form 4868 from the IRS website and mail it in.
Since the tax filing deadline is already close at hand, time is of the essence here, and I would recommend filing electronically if possible.
What Happens if You Miss the Tax Deadline?
If you owe the IRS money, then you want to do three things: file your extension as mentioned above, make any estimated payments if you have a rough estimate of how much you might owe, then file your return before the October 15 deadline. Remember, your tax payments are due on the tax deadline (April 15th most years). So if you missed the deadline to file, you should send in a payment for the estimated amount of taxes you owe, otherwise you may owe penalties.
What Happens If You Don’t File Your Tax Return?
OK, so you missed the deadline and you haven’t filed for an extension. What happens if you let it slide? Penalties and interest, my friend. And they aren’t pretty!
Failure to pay and failure to file penalties. These two types of penalties are automatically assessed by the IRS. Here is a rough outline of the penalties you may owe for failure to file or pay your federal taxes.
- Failure to file or (FTF) penalty assessed at 5% per month or partial month up to a 25% maximum.
- Failure to pay (FTP) penalty assessed at 0.5% per month or partial month up to a 25% maximum.
- If both the FTF and FTP penalties are assessed, the FTF penalty is reduced by the FTP penalty.
Underpayment penalties. You can also owe penalties for underpaying your taxes. These can be assessed at different levels, from a small fine to criminal charges, depending on whether or not the IRS determines there was criminal intent involved. Some of the possible charges include criminal or civil fraud, negligence, or frivolous return. Penalties for these can range from stiff fines to jail time. Here is more about what happens if you don’t file your federal tax return.
What if You Can’t Pay Your Taxes?
Even if you can’t pay your taxes, you still need to file your taxes or at least file for an extension. This lets the IRS know that you are aware of the situation and you are trying to resolve it. After you file your taxes or file for an extension, you need to communicate with the IRS and try to negotiate a payment plan so you can pay the IRS your taxes. You can ask for an extension (a set time frame to pay your tax bill), or enter into a payment plan.
Penalties and fees will continue to be assessed, so you will need to pay your taxes as soon as possible – even if that means dipping into your savings or taking out a loan to do so. You should avoid payday loans, but you might consider a loan from a peer to peer lending company such as Lending Club. They can have the money to you in a matter of days if you qualify for a loan. Another option is using a credit card to pay your taxes. This isn’t recommended for everyone because there are usually fees and interest rates involved. But it can be better than the alternative, which includes penalties and fees.
If you don’t pay your tax bill, the IRS can file a Notice of Federal Tax Lien, which can damage your credit score and cause other problems.
Failure to file or pay taxes can result in fines, ruined credit, or even jail time
There are stiff penalties for those who fail to pay their taxes, up to an including jail time for the worst offenders. All it takes to avoid these problems is a little bit of time to complete your taxes and file them, or at least file for an extension. So get to it!