April 15th is behind us, and maybe filing your taxes slipped your mind. Or maybe you were afraid to file because you didn’t have huge stacks of cash to pay your bill. Or maybe you’re still sorting through your shoebox full of receipts (a.k.a. your filing system). Either way, all is not lost. Whatever your reason for filing late, just make sure you file as soon as you can to save yourself from large penalties and interest and other repercussions. Here’s what you need to know about filing late:
- You might have to pay the failure to file penalty if you missed the due date or the extension due date and you owed taxes. If you owe taxes, you have to pay them by the due date even if you file an extension, or you may owe the failure to file penalty plus interest on the amount due. The IRS also charges interest on penalties, so the sooner you pay, the less you owe.
- Don’t lose out on a refund. You will not owe a failure to file penalty if the IRS owes you a refund; however you risk losing out on your refund for not filing on time. You need to file within three years of the due date to claim your refund, in most cases.
- There is a three-year statute of limitations that prevents you from getting a refund or applying overpayments to underpaid tax years.
- The statute of limitations on collecting outstanding taxes doesn’t start until you submit your return. There is no statute of limitations to assess and collect your taxes if you don’t file a return. It’s beneficial to file your taxes now even if you can’t pay everything you owe because it starts the statute of limitations for auditing your return. In most cases, the IRS can audit your return for three years after you file.
- If there’s a possibility you are facing Chapter 7 Bankruptcy, it’s better to file ASAP because you have to wait two years from the time you filed your taxes to be eligible to have those taxes, penalties and interest dismissed on your bankruptcy.
What to Do if You Can’t Pay Today
- You might be exempt from the failure to file penalty if you had an undue hardship. You have to file Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship.
- If you need to make a payment plan, contact the IRS, but you may still be subject to penalties and interest.
- You may be able to get a temporary delay in the collection of your tax bill. During the delay, the IRS will make sure you are still unable to pay and may file a Notice of Federal Tax Lien on your assets.
- A last resort option can be an Offer in Compromise. You apply using a form 656 and the fee to apply is $150. The IRS will only consider this after you have explored every other payment option. If approved, the IRS will settle for less than the amount you owe.
Because you care enough to send the very least!
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