What Happens If I File Late or Don't File At All?

You've worked hard for your money, and you feel like you don't have to pay Uncle Sam. Well, pump your brakes there...if you received income, you may be required to file an income tax return. Also, that return (or extension to file) must be filed by April 15th. If not, Uncle Sam won't slap you on the wrist, he goes straight for the pocket (or wage garnishment, or bank levy). So, let's see exactly how Uncle Sam does his deed...

1. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return and explore other payment options in the meantime.

2. The penalty for filing late is usually 5 percent of the unpaid taxes for each month of part of a month that a return is late. This penalty will not exceed 25 percent of the taxpayer’s unpaid taxes.

3. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

4. You will not have to pay a failure-to-file penalty if you can show that you failed to file on time because of reasonable cause and not because of willful neglect.

5. You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid.

6. If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty.

7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

Taxpayers unable to pay the total taxes due are encouraged to pay as much as possible. By paying as much as possible when you file, you lessen the amount of penalties and interest owed. Our office can then work with the IRS to work on an arrangement to pay the taxes due.

Based on the circumstances, you may qualify for an agreement to pay your bill within 60 or 120 days. The IRS is willing to offer these short term agreements in order to assist in tax debt repayment. Penalties and interest incurred will be less through this arrangement, as opposed to seeking to enter into an installment agreement.

Other arrangements used to assist our clients include:
* Monthly payments through an Installment Agreement,
* Temporary delay or significant hardship consideration, or
* Offer in Compromise

Remember, your questions and comments are what will make this blog more valuable and worthwhile! Feel free to post your questions or comments here, or you can give us a call at (866) 510-5477 or via email info@proctortaxprep.com.