For the personal returns of taxpayers, the IRS gives taxpayers until April 15th to file their tax return. However, if a taxpayer cannot file by April 15th, by submitting IRS Form 4868, they are granted an extension to file their return until October 15th. Before we go further, I wanted to point out that that an extension with Form 4868, is an extension to file your return, not to pay your taxes. Taxpayers who validly request an extension and file by the extension due date, will not incur a late filing penalty, but may still incur a late payment penalty.
Why don’t people file their tax returns timely?
There are a number of reasons that taxpayers don’t file their tax returns timely, but the two reasons below are what I see most often in tax practice:
- The Taxpayer doesn't file their tax returns timely because they owe, or believe they owe, income tax.
- The Taxpayer doesn't have all of the information to file their tax return properly. Sometimes, these are taxpayers who work W-2 jobs, but more often, it tends to be taxpayers who are self-employed, who have more complicated tax returns.
How Can a Taxpayer Resolve those Problems?
If a taxpayer owes the government, there are resolution solutions to tax debt including Payment Plans, Offers-In-Compromise, and currently uncollectible status available to the taxpayer. A taxpayer shouldn’t fail to file their tax return simply due to owing income tax.
When the taxpayers lacks tax documentation, taxpayers can seek professional tax help if needed. The information may be available from the IRS and 3rd parties to help build their return. Even if they are unable to perfectly rebuild a tax return, they can create a return with the best information available, disclose any limitations with the returns, and fulfill their compliance requirements by filing the return timely.
What Happens if I Don’t file my Return by the October 15th Extension Deadline Date?
- If you owe taxes and do not file timely, you will now incur a late filing penalty. This penalty is harsh. It is 5% per month with a 25% maximum penalty.
- If you owe taxes, you will also continue to incur a penalty for the late payment of taxes. This penalty is ½ percent per month with a 25% maximum penalty.
- In addition to penalties for late filing and late payments, interest is accruing on both the tax itself and the penalties.
- If your problem goes on long enough, like other tax debt issues, it can turn into a tax levy or Federal Tax Lien, both of which can be painful to taxpayers.
- If you’re owed a refund, remember that you have only 3 years to request the refund or it can be lost.
Remember that as we noted above, there are options for taxpayers that owe money to the government. I would recommend that Taxpayers file their returns as required and work with the IRS to come up with a solution to resolve their tax debt.
Do you Need Help?
If you need help with filing your Federal Income Tax Return or any issue related to IRS tax debt, we can help you. Please give me a call at (972) 821-1991 or at bob@jablonskyandassocates.com. To learn more about us, visit our website at https://jablonskyandassociates.com/.
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