Thinking about Filing Late? There Are Penalties to Consider

Thinking about Filing Late? There Are Penalties to Consider

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Thinking about Filing Late? There Are Penalties to Consider

15 circled with text, "Taxes Due."

Tax season lasts from January to when taxes are due mid-April. While this may sound like plenty of time to prepare a tax return, millions of people file their tax returns late each year. It may seem like there’s not a good excuse for not filing your taxes on time when you have over three months to gather all the necessary documents and prepare your returns, but from delivery problems to natural disasters to misimpressions of tax rules and regulations, it’s not uncommon for tax returns to be filed late. What happens if you don’t submit your return by April 15th? The penalty depends on several factors.

What is the penalty if you don’t owe money?

If you don’t owe the IRS anything, you won’t be penalized for submitting your tax return late. This doesn’t mean you don’t have to file your return. You still want to submit your tax forms as soon as possible in order to claim your refund. The deadline to ensure you get money back from the IRS if April 15th, 2022. If you requested an extension to file, your deadline will be October 15th, 2022. Just make sure you’ve submitted your request before the 15th of this month. If you miss either of these deadlines, your unclaimed refund will be forfeited to the U.S. Treasury.

What is the penalty if you do owe money?

If you fail to file your tax return by the due date, you will be assessed a late filing penalty. The penalty is 5% of the amount of tax you owe for each month your return is late. If you’re part way through the month when you file, you’ll still pay the penalty for the part of the month up until your payment. Fortunately, the maximum you can owe caps at 25% of the unpaid tax amount. If it’s over 60 days after the tax deadline, the minimum penalty is the lesser of $205 or 100% of the unpaid taxes owed to the IRS.

Now if you file on time, the penalty for paying your tax liability after the tax deadline is only 0.5% of the taxes you still owe for each month or part of the month you’re late. It also maxes out at 25% of the outstanding balance due. However, this fee will be waived if you owe the late filing penalty. If you don’t have the money to pay the IRS what you owe, it will still be less costly to file on time and pay later than it will be to not file your taxes. You will also be charged interest on any unpaid balance.

If you know you’re going to be late, what should you do?

It’s quite easy to get an automatic extension of time to file your returns. You don’t have to provide the IRS with a reason to get an extension, much less a good one. All you need to do is submit Form 4868.

If you do choose to file an extension for more time to file your taxes, there’s two important things to remember: You have to request the extension by the deadline for filing. If you wait until after April 15th to request the extension, it will be too late. The extension is for filing your return, not for paying your taxes. You should make a good faith estimate of any amount that you think you will and make a payment with your extension.

If you have questions or would like assistance with your tax return after filing an extension, contact Fricke & Associates, P.C. We’re here to help!

William T. Fricke
William T. Fricke
Since 1999 William Fricke has served as the Firm’s managing partner and provides accounting, audit, tax and consulting services to commercial, government, and nonprofit clients. Prior to becoming managing partner of Fricke & Associates, P.C., he worked for over 20 years as a small business and individual client services partner and as the partner-in-charge of the governmental and nonprofit practice sections of the firm of Metcalf Rice Fricke & Davis.