If you have missed the deadline for filing federal taxes in almost every state in the U.S., If you have not filed your tax return or did not receive a postmarked paper return by midnight on April 18, your taxes are overdue. So, if you want to know what happens if you miss the tax deadline, I invite you to read on.
There are many reasons why people fail to complete and file tax returns by the deadline. It can be due to lack of tax information, family problems, travel, and medical emergencies, among many other reasons.
However, if money is owed, the situation will be more urgent, and the longer you wait to file your tax return with the IRS, the more penalties and interest will accrue.
What happens if you are late and expect a tax refund?
If you expect a refund from the IRS on your tax return, you will not have penalties for late filing. In these cases, you have up to three years to file the tax return before the IRS releases the tax refund to the Treasury, and the money is gone forever.
If you file late, the tax refund may be delayed a bit, but you should still expect to receive the money in four to six weeks. However, the IRS may be making good use of the money, and the longer you wait to file taxes, the more money you will lose, so allowing the IRS to keep your cash longer will only deprive you of potential interest and purchasing power.
What happens if you miss the deadline and owe tax money?
If you have missed the tax deadline without filing an extension, you should finish your return as soon as possible and send it in. Failure to file taxes if money is owed to the IRS may incur late filing penalties and late payment penalties.
Late Filing Fees and Penalties
There are two basic penalties charged by the IRS for delinquent filing taxes when money is owed. These will be:
- Failure to file penalty: this is a penalty that is 5% of the amount owed for each month or part of a month the return is late. This penalty can be a maximum of 25%, and if the return is more than 60 days late, the minimum sentence will be $435, or the balance of the tax due is less.
- Non-payment penalty: this penalty will cost less money and is a great reason to request an extension on time, even if you cannot pay anything. The calculation for this type of penalty will be 0.5% of the taxes due that are not paid by the deadline. In these cases, the penalty is also charged for each month or part of a month of late payment, with a maximum total penalty of 25%.
The IRS charges interest on delinquent taxes, which is determined by adding 3% to the federal short-term interest rate. This rate is adjusted quarterly, and interest is compounded daily.
Is it possible to file an extension after the tax deadline?
No, it is not. Tax extensions will provide taxpayers with an additional six months to complete tax returns, but they must also file them before the tax deadline.
Taxpayers filing extensions must also include the estimated amount of money owed on IRS Form 1040-ES. However, it will be too late to file for an extension of the deadline that has elapsed.
What happens if an extension is filed on time?
If you have filed a timely extension, you may have until October 15 to file your tax return, provided it was filed before April 18. This is provided you have paid an estimated amount close to what you owe, and you will not be subject to penalties or fines if you file the return and pay any liability by October 15.
In the event that not enough money is paid with the tax extension, you may be subject to a late payment penalty. The IRS expects your estimated payment to be at least 90% of the total tax liability. For unpaid taxes, you may charge a penalty of 0.5% per month on the amount of unpaid taxes, so you should still complete your tax return and file it as soon as possible.
What happens if you cannot pay the taxes you owe?
If you do not have the money to pay, you can take some steps to ease your financial burden. This is through a payment plan offered by the IRS, and if you can deliver within 180 days, you will be allowed to apply for a short-term payment plan that costs nothing.
Penalties and interest will still accrue until you pay your debt. This can apply online or at a local IRS office, but it should note that this will accrue penalties and interest until the debt is paid off.
If more than 180 days are needed, a long-term payment plan is available, priced at $31 for automatic monthly bank payments via direct debit or $130 for payments without direct debit.
Low-income taxpayers can waive the direct-debit installment payment plan fee or pay $43 for the non-direct debit plan. If the tax liability is not very high, you could use a credit card with a 0% introductory APR to pay the taxes, considered a debt consolidation loan. However, the interest rate will be higher than the IRS currently charges.