If you missed the April 18 deadline to submit your taxes and did not seek (or obtain) an extension, the Internal Revenue Service (IRS) has straightforward advice: file now. The earlier you submit, the lower your fines and interest will be.
If you are owed a refund, there is no penalty for submitting late. In reality, you have three years to make a claim in order to receive your money back.
If you didn’t file because you didn’t owe taxes, you might be missing out on refundable tax credits like the Earned Income Tax Credit, Child and Dependent Care Credit, or Child Tax Credit. Those who do not normally file and who did not qualify for a third-round Economic Impact Payment, or who received less than the full amount, may be entitled to claim the 2021 Recovery Rebate Credit when they submit their 2021 tax return.
- If you missed the April 18 tax filing deadline, the IRS recommends that you file as soon as possible to avoid penalties.
- Those who fail to file because they owe no taxes risk losing refundable credits.
- Failure to file and/or pay may result in fines and interest.
- If you have filed on time for the previous three years, you may be eligible for a first-time penalty abatement.
- Military personnel in a conflict zone obtain an automatic extension with no consequences.
- Pay your taxes online rather than by mail to decrease or eliminate penalties quicker.
Reduce Penalties and Interest
The key reason to file as soon as possible, even if you missed the deadline, is to avoid hefty penalties and interest. The only way to prevent the accumulation of fines and interest is to submit and pay your taxes.
It is vital to file as soon as possible and pay as much of the amount owed as feasible. There are two sorts of penalties for late-filed tax returns: a Failure to File penalty and a Failure to Pay penalty. In addition, the IRS assesses fines with interest. Penalties and interest, unsurprisingly, may soon mount up.
If you fail to submit a tax return when you should have, the IRS may issue you a CP59 letter stating that it has “no record that you filed your previous personal tax return or returns.”
Failure to File
The Failure to File penalty is 5% of the tax payable for each month (or portion of a month) that the tax return is late, up to a maximum of five months. Even if you are unable to pay your taxes, you should file as soon as possible to avoid the Failure to File penalty.
If you get both a Failure to Pay and a Failure to File Penalty in the same month, the Failure to File Penalty will be reduced by the amount of the Failure to Pay Penalty for that month. For example, instead of a 5% Failure to File Penalty, the IRS would impose a 4.5% Failure to File Penalty plus a 0.5% Failure to Pay Penalty for the month.
If you submit your return more than 60 days after the due date, the Failure to File penalty is $435, or 100% of the unpaid tax, whichever is less.
Failure to Pay
The Failure to Pay penalty is 0.5% of the unpaid tax owing for each month or part of a month until the tax is paid in full or until the Failure to Pay penalty reaches 25%, at which case the Failure to Pay penalty is waived. The Failure to Pay penalty is 1% per month if you do not pay taxes owing within 10 days of receiving an Intent to Levy notification from the IRS (or partial month).
Though the IRS discovers that you owe tax that you did not mention on your return, even if the return was filed on time, it will issue you a notice or letter stating the amount owed and a payment deadline. The deadline will be 21 days after the notification is issued. Failure to pay will result in a 0.5% penalty on the amount owed.
Interest on Penalties
The IRS also assesses interest on fines imposed. Depending on the kind of punishment, the date from which interest is assessed varies. This interest raises the amount you owe until the debt is paid in full. For example, the current interest rate on unpaid taxes is equal to the Federal short-term rate + 3 percentage points.
If you filed on time, paid your taxes for the previous three years, and completed other conditions, you may be eligible for First Time Penalty Abatement. If you behaved in good faith and can demonstrate justifiable cause for not being able to pay your taxes, you may request that certain penalties be removed or reduced. The underlying penalty must be abolished before the interest may be erased.
If you disagree with the punishment or the amount of the penalty, you may contest it. To contest a penalty, contact the IRS at the number printed in the upper right corner of the letter or write to the agency at the address stated on the notification. When you phone or write, you should be prepared to do the following:
- Indicate the IRS notice or letter that was sent to you.
- Describe the precise punishment that you wish to contest.
- Explain why you think the IRS should eliminate the penalty.
Finally, to avoid a Failure to Submit penalty, you may request an Extension of Time to File, which would allow you to file your return until October 17, 2022. However, if you do not pay the amount owed at that time, you will be assessed a Failure to Pay penalty and interest on that penalty until you do.
A filing extension is not the same as a payment extension.
If you fall into one of the following categories, you may be eligible for an automatic extension to file and pay without penalties or interest.
- A military person who has served or is currently serving in a combat zone. You may be eligible for an extra 180-day extension to file and pay taxes.
- Member of a combat support unit or a contingency operation in support of the Armed Forces. You may potentially be eligible for a 180-day filing and payment extension.
- A taxpayer who does not reside in the United States. U.S. citizens and permanent aliens living and working outside the United States and Puerto Rico, including military personnel on active duty who do not qualify for the conflict zone extension, may be eligible for a 2-month filing and payment extension.
- Some catastrophe survivors. Those who qualify will have additional time to file and pay their taxes.
Pay Taxes Electronically
Use your Online Account, IRS Direct Pay, debit or credit card, or digital wallet to pay your taxes promptly and avoid fines and interest. You may also apply for a payment plan online (including an installment agreement).When you pay online, you get instant confirmation. You may obtain email confirmation of your payment using Direct Pay and the Electronic Federal Tax Payment System (EFTPS).
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