Late filing taxes can incur penalties from the IRS, adding financial burdens to your plate. Let’s delve into the consequences and explore ways to mitigate them.
When you fail to file your taxes by the deadline, the IRS may impose penalties, whether you owe taxes or not. Known as the failure-to-file penalty, this consequence arises from missing the tax return submission timeline.
Two types of penalties can apply: a late filing penalty and a late payment penalty. The severity of these penalties depends on factors like the amount owed and the duration of the delay.
The late filing penalty amounts to 5% of the unpaid taxes for each month your return remains unfiled. Meanwhile, the late payment penalty stands at 0.5% of the unpaid tax amount per month.
If both penalties are applicable concurrently, the maximum penalty can reach 5% per month. However, each penalty type caps at 25% of the total tax owed.
Despite the penalties, there are strategies to manage the situation effectively. Filing for an extension grants you additional time to organize your finances and submit your taxes, albeit the payment remains due by the original deadline.
If you can’t afford to pay your taxes immediately, consider filing your return regardless. The penalty for late filing is usually less severe than that for late payment. Seek professional assistance to ensure accurate tax preparation and timely submission.
However, bear in mind that filing taxes hastily can lead to errors, potentially triggering an IRS audit. Thus, prioritize accuracy alongside timeliness in your tax preparation endeavors.
Furthermore, remember that state tax obligations demand attention too. Schedule a mid-year tax checkup to stay on top of your financial responsibilities.
If you’re unable to settle your tax debt in full, the IRS offers relief programs, including penalty abatement, tax installment agreements, offers in compromise, and currently non-collectible status.
Ultimately, filing taxes promptly remains the best practice. Although missed deadlines can’t be reversed, proactive measures can mitigate penalties and streamline future tax obligations. Remember, our tax preparation appointments open in December and fill up quickly. Pay attention to when your forms are all in and make your appointment ahead of time to ensure that you do not need an extension.