You’re Late! What to Do if You Haven’t Filed Your Taxes

Filing your taxes lateTax day has come and gone, and there are still some people who haven’t filed their returns or extensions. There is one important thing to know if you haven’t filed your taxes yet – file them as soon as possible, EVEN IF YOU CAN’T PAY ALL THE TAX YOU OWE.

The IRS can apply two different penalties for late filers/payers. The first is a failure-to-file penalty for not filing on time. The second is a failure-to-pay penalty for paying late. While it might seem counter-intuitive, it will actually cost you much more in penalties for not filing on time than it will for not paying on time. The penalties are:

Can't pay taxes? File anyway. Carpenter Evert and Associates

Penalty for late payment.  The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes (maxes out at 25% of your unpaid taxes).

Penalty for late filing.  The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month that a tax return is late (not to exceed 25% of your unpaid taxes).

Combined penalty per month.  If the failure-to-file penalty and the failure-to-pay penalty both apply in any month, the maximum amount charged for those two penalties that month is 5 percent.

Let’s look at an example. Joe and Joanna Johnson owe an additional $5,000 in tax because of a change in income that they hadn’t accounted for. Joe freaks out and wants to ignore their taxes until he gets his work bonus in five months and they have the money to pay the taxes. Joanna is more practical, and knows they should file now, even if they can only scrape up $500 of what is due.

If they go with Joanna’s plan, this is what it will look like. (If you file after April 18, figure in a daily late filing penalty of about $8.00 a day.) The penalty for late payment is .5% of unpaid taxes per month for 5 months, totaling $ 113 in penalties.

Joe’s scenario would look like this if they wait until October 16 to file and pay the taxes they owe. The penalty for late payment and late filing is 5% of unpaid taxes per month over 5 months, totaling $ 1,250 total penalties (and they haven’t even paid the taxes yet!)

The Johnsons will save well over $1,000 in penalties by filing now, even though they can’t pay all their tax until September. If you are in a similar situation and need help completing your return, contact one of the tax experts at Carpenter Evert. We can help you get your return filed and save you money. But remember that every day counts, so whether you call us or file on your own, do it now so you can stop the penalties from adding up.

For more information from the IRS, go to the IRS Collection Procedural Q&A.

Late Tax Filing and Late Tax Payment Penalties

Can't file taxes on time Carpenter Evert and AssociatesGet the facts about late tax filing and late tax payment penalties from the IRS.

Here are seven important points about penalties for filing or paying your taxes late:

  1. If you requested an extension to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a late payment penalty. However, you must pay any remaining balance by the extended due date. IRS Direct Pay is an electronic payment option that allows you to schedule payments online from your checking or savings account with no additional fee and with immediate payment confirmation. It’s secure, easy, and much quicker than mailing in a check or money order. ——————–
  2. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should explore other payment options, such as getting a loan or making an installment agreement, to make payments. The IRS will work with you. For example, you can apply for an Online Payment Agreement if you owe $50,000 or less in combined tax, penalties and interest, and filed all required returns. You may also qualify for a short-term agreement if your balance is under $100,000. ——————–
  3. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. ——————–
  4. If you do not pay your taxes by the tax deadline, normally you will face a late payment penalty of one-half of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month the tax is unpaid. It starts accruing the day after the tax-filing due date. ——————–
  5. If both the 5 percent late filing penalty and the one-half percent late payment penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent. ——————–
  6. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $205 or 100 percent of the unpaid tax. ——————–
  7. You will not have to pay a late-filing or late-payment penalty if you show reasonable cause for not filing or paying on time. ——————–

Some people can get more time to file without having to ask for an extension. They include:

  • U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 15 to file and pay any amount due without requesting an extension. ——————–
  • Members of the military and others serving in Afghanistan or other combat zone localities generally can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3, Armed Forces’ Tax Guide.——————–

For more information about penalty and interest charges, refer to Part One, Chapter 1, Filing Information, of Publication 17, Your Federal Income Tax for Individuals.