Missing the tax deadline is quite a unique situation – and like missing any other deadline, the consequences grow with time. If April 15th has come and gone, don’t panic just yet. You can redeem yourself and escape without a scratch if you act fast. If you’ve missed the tax deadline, learn how to fix your situation below.
Before you put together your plan for filing, understand the consequences of delaying any further; there are three different types of fees you may face.
Failure to File Penalty: Unless you can prove to the IRS that you have very good reason why you’re filing late, you’ll be hit with this fee. The amount is 5% of the balance owed for each month you don’t pay, with a maximum of 25%.
Failure to Pay Penalty: Failing to file (and even filing an extension) doesn’t give you extra time to pay taxes. You’ll also accrue penalties that amount 0.5% of your unpaid taxes each month they go unpaid.
Underpayment Fee: This fee is more variable than the above penalties. Depending on your situation and filing status, you may be charged a fee for underpaying as a result of failing to file.
Don’t forget that these fees can all accumulate together, plus interest. That can result in a big loss, that was ultimately unavoidable.
The need to file is inevitable, but you may have options.
File then Amend: There may be circumstances where you don’t have all of your tax documents, but the deadline has past; in this instance, file anyway and plan to file an amended return when you have all of the information needed. It’s always better to file sooner than later.
File an Extension: Choose this option knowing that you do not get an extension to pay your owed taxes. File Form 4868 or consult your tax preparer to file for you; this option may be best if you don’t want to go through the hassle of amending a return, and can estimate your tax payment if required.
Pay an Estimate or Apply for a Plan: Even if you’re unable to file due to unforeseen delays, you can still make a payment to the IRS to avoid penalties and fees. You can easily make an estimate on your own or with your tax preparer, and make an electronic payment. If you’re unable to make a payment immediately or will have a hefty tax bill, apply for a payment plan online as soon as possible, which will help you avoid fees and penalties as well.
To avoid a scramble or extra work when you file in 2019, take the time to gather and organize documents starting now. Work with your tax professional to make a plan for documentation, paying estimated taxes if applicable, and tracking credits and deductions that might change in the new year. In the meantime, file your late return as soon as possible!
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