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You Missed the Tax Return Deadline: Now What?

2017-04-20 23:18 | Network |

 You Missed the Tax Return Deadline: Now What?
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Missing the deadline for filing your return is serious, but not the end of the world. If you asked for a filing extension, you’re not late. But if you didn’t request more time to file, don’t ignore your failure; take action now to correct the problem. Also, keep in mind that even though you got an extension, the tax payment was still due on April 18th.

Minimize Interest and Penalties

Missing the filing deadline means that you likely owe interest and penalties on what you owe, so the sooner you complete your annual tax duties, the less costly your mistake will be. Potential costs:

1) Interest is charged on what you owe, starting April 19, 2017. Currently, the interest rate is 5% for each late month, but it will not exceed a total of 25% of your unpaid taxes.

2) There are two penalties: (1) The late filing penalty is usually 5% of the tax owed for each month, or part of a month, that the return is late, up to five months. If the return is more than 60 days late, there is also a minimum penalty for late filing, which is the lesser of $135 or 100% of the tax. (2) The late payment penalty is one-half of 1% for each month, or part of a month, up to a maximum of 25% on the amount of tax that remains unpaid from the due date of the return until paid in full. The one-half of 1% rate increases to 1% if the tax remains unpaid after several notices and 10 days after the IRS issues a notice of intent to levy or seize property.

It may be possible to get the IRS to waive some or all penalties, which may be done if you can show that you had reasonable cause for your failure and you acted in good faith, however, it's rare. Don’t let your inability to pay taxes owed keep you from filing a return as soon as possible. Work out a payment arrangement with the IRS. (To learn how, read When You Can’t Pay Your Taxes on Time.)

Recoup Your Refund

If you are owed a tax refund (e.g., you had too much withholding taken from a paycheck or you’re eligible for the earned income tax credit), the IRS does not voluntarily send you a check; you have to claim your refund by filing a tax return. So the sooner you file, the sooner you'll get your money back.

Don’t wait too long because you only have a limited period in which to claim a refund. In most situations, this period is three years from the due date of the return for the year of the refund.

You won’t get interest on what you’re due even though you could have claimed the refund by April 18. Interest on tax refunds on late-filed returns does not start to accrue until 45 days after you submit your return. In other words, once you file your return after April 18, the IRS has 45 days to pay your refund with no interest; you’ll get interest if the IRS does not pay your refund within 45 days of the date you filed the return.

File Electronically

Even though April 18 has passed, you can still e-file your 2016 income tax return with the IRS through October 16, 2017 (if you file later, you’ll have to send a paper return by mail). You can e-file at no cost using FreeFile or services such as Turbo Tax.

E-filing also means you’ll likely receive any refund due more promptly than submitting a paper return. The IRS claims to issue 9 out of 10 returns on e-filed returns in less than 21 days.

If you have a complex return that is not suitable to either of these no-cost filing options, you can use commercial software (cloud- or computer-based) or a paid tax return preparer.

The Bottom Line

Things happen that may have prevented you from filing your return on time (or requesting a filing extension). There may be consequences for your inaction, but you can minimize them by now acting as quickly as possible to become tax compliant by filing the late return and, where applicable, paying any taxes due.


(Editor:FinAll)
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