Tax season passed quickly, didn’t it (not really the last two years – but when you’re usually running late it always seems like that)? Let’s just say you completely forgot that tax day was May 17th of this year and that you are late filing your tax returns. Yes … the tax deadline in 2021 is May 17th.
Are you in a hopeless hole What can you do?
If you discovered your delay before May 17th, you can apply to the IRS for an extension of your tax. All you have to do is fill out form 4868. You get an extension just to ask and then you have until October to file your taxes.
We are all human. Life gets busy and we all forget at times.
However, if you missed the opportunity to file an extension (you can only file an extension until midnight on tax day), here are some tips that may help you depending on your specific situation.
What to do if you get a tax refund
First, it is important to know that there is no need to panic about getting a tax refund. You can still submit your taxes after the tax period of up to 3 years has expired. Let’s look at a scenario.
You haven’t filed your taxes by May 17, 2021, but you go over to Turbotax, TaxAct, or your tax advisor and it is determined that you have a refund. There is no penalty and you will be refunded. Even if you don’t file your taxes at all this year, you can file them along with other tax returns until 2024 (up to three years).
However, if you fail to file the tax return by April 2024, your refund will be forfeited. Remember – 3 years!
What to do if you are in debt and late filing taxes?
Unfortunately, if you are late filing your return and owe the state taxes, there will be one Failure to submit the penalty pay.
According to the IRS website, the late filing fee is 5% of the amount you owe the government. If you fail to pay the fine, an additional 5% will be added for each month that you fail to file your tax return, up to a maximum of 25%.
Second, if you owe a late payment penalty, it is assessed at 0.5% of the tax owed, which is then increased to a maximum of 25% monthly.
Aside from not filing a penalty, your taxes will accrue interest every month if you do not pay any taxes owed. The interest is assessed on a case-by-case basis.
Let’s look at an example of filing taxes late.
Let’s say you are late filing your taxes and owe the government $ 500 on your tax return.
Failure to submit the penalty
$ 500 x 0.05 = $ 25 (for the first month)
Assuming you have a 3 month late filing, this increases to
500 x 0.05 x 3 = $ 75
If you are late paying your taxes:
500 x 0.005 x 3 = $ 7.50
We’re already at $ 582.50 (quick and rough estimate as interest is also calculated on taxes due). That’s the original $ 500 you owe plus $ 82.50 in penalties.
As you can see, the result of a late tax return, and especially when you owe something, becomes expensive to the government very quickly. You pay 16.5% more just for being late.
How to pay your taxes if you are late
It’s no different than paying your taxes during the regular tax season. The IRS does not currently accept cash payments. You can either pay online or send a check or money order to the US Treasury Department. If you are late because you don’t think you can afford your taxes, check out our article on what to do if you can’t afford your taxes.
Our advice if you are late: even if you find you missed the deadline, fix the problem as soon as possible. The longer you wait, the more penalties and interests there will be. We want to help you save money and not give it away because of an oversight.
Now, if you are a U.S. citizen or legal permanent resident who works overseas, is enlisted in the armed forces and is currently in a combat zone or has suffered a disaster, there are special rules for you. Detailed descriptions of these provisions can be found on the IRS.gov website.
While 2020 and 2021 were crazy years, filing your taxes on time is important. Nor is it anything to be afraid of! If you’re using the best tax software, you can probably turn off your simple tax return in 20 to 30 minutes!
It’s also important to remember that late filing really doesn’t matter if a refund is due. You just don’t want to miss the three year limit and lose your money.
However, if you owe taxes, you still need to file on time! These penalties can add up quickly if you’re not careful.
As always, if you’re not sure what to do, speak to a tax advisor and get the help you need.
Have you ever found out that you are late filing your tax returns? What was your experience