Here are the steps to take after missing a tax deadline.
If filing your taxes is still on your to-do list and April 15 has come and gone, there’s really only one solution: File as soon as possible or risk additional charges.
When you miss the filing deadline, a failure-to-file penalty kicks in. And if you also owe money to the Internal Revenue Service (IRS), you’ll be charged a failure-to-pay fee. On top of that, interest will accrue on your unpaid taxes, all of which can add up very quickly.
But if filing your taxes as soon as possible isn’t an option for you, don’t worry. Here are some tips to help you file your taxes after filing day.
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The Cost of Failing to File
The failure-to-file fee is even steeper than the failure-to-pay fee as a way to encourage people to file their taxes, says NFIB member Scott Bollenbacher, CPA, owner of Bollenbacher & Associates in Portland, Indiana. For example, if your business is an S-Corp, partnership, or LLC, the failure-to-file penalty is $205 per month per partner, he says. And that’s when you don’t owe taxes.
For that reason, it always makes sense to file your taxes even if they’re late or you can’t afford to pay the taxes you owe. Yes, you’ll still have to pay interest and the failure-to-pay penalty, but at least you won’t pay a penalty for not filing. “The penalties are running and they get higher with each month until they cap out,” says CPA Jeff Donovan of Donovan CPAs in Avon, Ind.
What to Do After You Miss the Deadline
If the IRS owes you money, you won’t get that refund until you file. To get started, the first thing you should do after missing the deadline is clear your calendar and make time to work on your taxes or make a call to your accountant or CPA. The quicker you file your return, the more money you’ll save, but don’t sacrifice accuracy in favor of speed. You can be charged an accuracy penalty if you make a mistake like significantly under reporting your income, Bollenbacher says.
When you’re ready, file your past-due return the same way and to the same place as an on-time return. If you owe money, but can’t afford to pay all that you owe, you have several options. If you can pay some of the money, send that with your return to reduce your interest payments and penalties. You can also request up to 120 days to pay your amount in full. You might also qualify for an offer in compromise, which lets you settle your tax debt for less than you owe.
Otherwise, contact the IRS to set up an installment plan. You will still be charged interest and late payment penalties until you pay off what you owe, so it makes sense to get started sooner rather than later. However, keep in mind that you will also be charged $105 for setting up the agreement, or $52 if the payments are deducted directly from your bank account, and $43 for qualified lower-income taxpayers.
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Avoiding Penalties
Finally, you might be able to avoid paying penalties if you meet certain criteria—a natural disaster, a serious illness, inability to get records—through a policy known as penalty relief due to reasonable cause, or if you meet the requirements of the first time penalty abatement policy.
Business owners may file taxes late for many reasons: missing tax forms, a sickness or death, miscommunication with a CPA, or the person who handles their taxes quits, says Bollenbacher.
While good old-fashioned procrastination is also very common, it can also be very costly. Next tax season, if there’s a chance you’re going to miss the filing deadline, ask for an extension from the IRS in advance. An extension can help reduce penalties if you can’t afford to pay in full by the deadline. However, keep in mind that while an extension moves the filing deadline from April 15 to Oct. 15, it does not provide extra time to pay taxes that you may owe and payments are still due by April 15, 2019 for tax year 2018. To learn whether this option is applicable, contact your tax adviser to learn more.
“Filing on time saves so much in penalties, interest, and stress,” Bollenbacher says. “I don’t like paying taxes, but I hate paying penalties even more.”
