April 12, 2023: Long gone.
October 16, 2023: Also gone, yikes!
If you weren’t prepared to file your federal tax return in mid-April, you hopefully requested an extension by filing Form 4868. But what happens if you still haven’t been able to put your tax information together and also missed the October deadline?
You may also be interested in: Everything you need to know about filing a tax extension
Help! I missed the extended tax deadline!
The IRS may charge a failure-to-file penalty if you fail to file by the tax extension deadline. The penalty amount is based on your unpaid taxes: 5% of your taxes due for every month or partial month your tax return is not filed, capped at a maximum of 25% of any taxes owed.
Example: If you owe $1,000 in taxes, the IRS will charge you $50 every month you don’t file your taxes. But the most they may charge you is $250.
Expecting a tax refund?
If you’re expecting a tax refund and have yet to file your tax return, the IRS won’t charge you a penalty for late filing. However, you still need to file to get your refund. Don’t wait too long!
The IRS typically grants a three-year window from your tax return’s due date to claim a refund. After this period, you forfeit your refund. For instance, if your 2022 return was due on April 18, 2023, you’d have until 2026 to request a refund. Failing to file by the due date relinquishes your refund to the U.S. Treasury.
Remember, even if you don’t owe, the IRS may require you to file a return.
What to do if you owe taxes and haven’t filed
If you think you’ll miss the upcoming extended tax deadline, it’s advisable to pay as much as possible as soon as you can to reduce any interest or penalties on your tax account, including the failure-to-file penalty and the failure-to-pay penalty.
The failure-to-pay penalty applies if taxes aren’t paid by the original or extended due date. It amounts to 0.5% per month for unpaid taxes. When both failure-to-file and failure-to-pay penalties apply, the former is reduced by 0.5%, resulting in a 4.5% monthly charge.
For instance, if you didn’t file or pay $1,000 in taxes, with both penalties applied in one month, you’d owe a total penalty of $50 (5% of $1,000)—a 0.5% failure-to-file penalty and a 4.5% failure-to-pay penalty for that month.
An extension to file is not an extension to pay
Remember that even when you file a timely extension with the IRS, you don’t gain an extension on the deadline to pay, nor do you gain immunity from penalties. You should estimate your taxes and pay the amount due by the original tax deadline to avoid incurring additional interest or penalties.
Unable to pay your taxes in full?
While it’s always better to pay as soon as possible, there are some instances when you simply can’t do that. Here are a few options available to you:
- Short-term payment plans: If eligible, you have 180 days to pay. There is no fee to request a payment plan, but interest may accrue. Qualify online for amounts under $100,000 or call 800-829-1040.
- Monthly installment agreements: Make monthly payments for amounts under $50,000. Fees range from $31 to $130. Some may be exempt based on income. Apply online.
- Temporary delay in collection: The IRS may temporarily postpone debt collection if you can’t pay. Complete Form 433-F and provide financial proof. Note: Balances may increase due to penalties and interest.
How does the Free File Program work?
The IRS’ Free File Program is accessible to taxpayers with an adjusted gross income (AGI) of $73,000 or less. It offers a user-friendly, step-by-step process through various tax software providers like TaxSlayer and TaxAct. While federal forms can be filed for free, state taxes may require an extra fee.
For those with an income above $73,000, the option is IRS Free File Fillable Forms. However, be prepared for a more hands-on filing process. These forms enable electronic filing but offer minimal guidance and calculations.
If you plan on using the Free File Program, don’t delay! It’s usually available until mid-October each year.
You may also be interested in: Tips for a stress-free tax season
Seek professional help with complex tax matters
If you suspect that you may owe penalties for filing your tax return late, you should consider speaking with a tax professional before you file, as you may be responsible for penalties plus interest. Don’t hesitate to reach out to our team for assistance with getting your financial house in order. We’re here to support you every step of the way.