Is It Too Late To File A Tax Extension
Yes. The deadline to file for a tax extension has passed.
The deadline to file a tax extension was the same deadline as tax day itself: April 18.
If you did already file for a tax extension and your extension was approved, you have six months to file your return, and your return is now due on Oct. 17.
It’s Better To File Late Than Not At All
You might be thinking, âIf Iâve already missed the deadline, whatâs a few more weeks?â But the sooner you submit your tax return, the better . So do your best to file the next day or soon thereafter.
If you earn $73,000 or less per year, you can file your return online using one of the IRSâ free federal tax filing options, which provides complimentary tax-preparation software. If you earn more than $73,000, you can still file online using the IRSâ free electronic forms, but youâll need some tax-prep knowledge if you choose to go this route.
Know The Penalties And Fees
If you fail to pay your tax bill on time, be aware of the two main penalties and fees youll be hit with: the failure-to-file penalty and the failure-to-pay penalty. Both immediately start accumulating on April 19, and they can all add up, significantly snowballing your tax liability.
Basically, these penalties and associated interest are just like credit card debt, says Tony Molina, CPA, product evangelist at Wealthfront. You should take care of it ASAP.
Heres how they work:
- Failure to file: This penalty is worth 5 percent of the unpaid taxes, increasing by 5 percent for each month up to 25 percent. In other words, the penalty maxes out once youre five months late. If your tax return was more than 60 days late, the minimum penalty is $435.
- Failure to pay: This charge is worth 0.5 percent of your tax balance for each month the tax remains unpaid. If you dont pay your tax within 10 days of getting a notice from the IRS, that penalty will increase by 1 percent per month. The penalty wont exceed 25 percent of your unpaid taxes.
The IRS applies those full levies, even if you pay your tax in full before the month ends.
In the instances when both penalties are applied, the IRS reduces the failure-to-file penalty percentage by the failure-to-pay penalty for that month. For example, in your first month of an outstanding tax balance, the IRS would apply a 4.5 percent failure-to-file penalty and a 0.5 percent failure-to-pay penalty.
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When Will I Get The Recovery Rebate Credit
You will most likely get the Recovery Rebate Credit as part of your tax refunds. If you electronically file your tax return, you will likely receive your refund within 3 weeks. If you mail your return, it can take at least 8 weeks to receive your refund.
Claiming the Recovery Rebate Credit will not delay your tax refund. However, if you dont claim the correct amount of the Recovery Rebate Credit, your refund may be delayed while the IRS corrects the error on your return. The IRS will send you a notice of any changes made to your return.
You can check on the status of your refund using the IRS Check My Refund Status tool.
No Time Limits On Collections
Nope. There are no time limits on the IRS for tax collections. So, dont think the federal government wont notice you skipped a year or ten. It files a substitute return for you, but you really dont want them to do that.
Granted, this year, you didn’t have to file until July 15, 2020. You would think the extra time would help, but maybe the delayed date didn’t just roll around it flashed right by. You could be excused with the pandemic and all, but you still have to file your taxes eventually. Better sooner than later.
After all, neglecting to file and pay your income taxes is illegal, you know.
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What If I’m Still Awaiting My 2020 Tax Return
The IRS says it “continues to make progress in this area and has taken numerous steps to help address this issue.”
If you are still awaiting a 2020 tax return, you do not need to wait for it to be fully processed in order to file your 2021 taxes.
According to the IRS, those with unprocessed 2020 tax returns, should enter $0 for last year’s AGI on their 2021 tax return when electronically filing.
Can I Do My Taxes Late
Late-filing penalties can mount up at a rate of 5% of the amount due with your return for each month that youre late. If youre more than 60 days late, the minimum penalty is $100 or 100% of the tax due with the return, whichever is less. Filing for the extension wipes out the penalty.
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Taxpayer Relief For Exceptional Circumstances
If you are filing your taxes late because of circumstances beyond your control, don’t panic the Canada Revenue Agency may waive the late-filing penalty and applicable interest. You can get more information about this in the CRA’s circular IC07-1: Taxpayer Relief Provisions.
To make a request for relief from penalties or interest you can fill in and submit Form RC4288 Request for Taxpayer Relief – Cancel or Waive Penalties or Interest. Examples of exceptional circumstances include:
- You have suffered a serious illness or accident
- You are undergoing emotional distress from a divorce or death of a family member
- You have suffered a disaster such as a fire, flood, or earthquake
- If you are communicating by mail, disruption via a postal strike
You may also avoid penalties and interest if the delay is a result of actions by the CRA, including:
- Processing errors by the CRA
- Incomplete or incorrect information on the return, resulting in corrections or requests for additional information by the CRA
- Delays in processing resulting in a late assessment of amounts owing
- Delays resulting from reviews, audits, objections, or appeals
The CRA recommends that you use Form RC376 Taxpayer Relief Request – Statement of Income and Expenses and Assets and Liabilities for Individuals for this purpose. This form should be submitted along with Form RC4288 either online using My Account or My Business Account, or by mail to your nearest tax service office.
When Will I Get My Tax Refund
If your goal is getting your tax refund as quickly as possible, you should know that the IRS recommends filing electronically and choosing direct deposit as your method of payment. The agency also notes that most taxpayers will receive their refund within 21 days of their electronic filing date, provided no issues are detected.
Some returns may require manual review, however, in which case processing can take longer. The IRS also reports that, in cases where problems are detected but they can be resolved without corresponding, taxpayers will receive an explanation in the mail of changes that were made by the agency.
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Dont Forget Your State
Unless you live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming, the IRS is not the only tax agency to worry about. All 41 other states have their own income tax reporting requirements, and a few cities do as well. In many cases, if you havent filed a tax return, you may be contacted first by your state tax collector, not the IRS. If this happens, you can bet the IRS is not far behind. All states except Nevada have agreements with the IRS to trade tax information about their residents. In this electronic age, the exchange occurs automaticallyif one taxing authority finds you arent filing, the computers will turn you in to the other. If you file a late IRS return, be sure to file a state return as well.
Should I File For An Extension
As previously mentioned, filing for an extension will push the deadline back to October 15, 2021. If filed before the tax deadline, you will not have to pay penalties or fees unless you miss the October 15 deadline.
While it is always best to file your returns by the original deadline, extenuating circumstances may make this problematic. If you cannot physically meet the original deadline, please file an extension before April 15, 2021.
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Getting Out Of Tax Debt
You may find that you owe the IRS money when you’ve finished your returns. You’ll avoid any further fees or penalties if you can pay what you owe immediately, but fees may be charged if you pay by credit card. The IRS can work with you to arrive at a payment plan to help you get out of tax debt if you need a little more time.
Approval of an installment plan to pay your tax due will depend on whether you’re caught up on your filings and how much you owe. You’ll still accrue penalties and interest until the balance is paid in full, even if the IRS agrees to the plan. Long-term payment plans will incur setup fees as well, which may be waived if certain conditions are met.
Consequences Of Not Filing
It is a crime not to file a tax return if taxes are owed. By contrast, there is no criminal penalty if you file but cant pay your taxes. Youll owe interest and penalties, but you wont be sent to jail. So even if you dont have two dimes to rub together and owe a bundle of taxes, file your return.
If you ignore this advice and fail to file, you can be fined up to $25,000 per year and/or sentenced to one year in prison for each unfiled year. Our justice system, however, doesnt have enough jails to put away even 1% of the nonfilers, so going to jail is highly unlikelyeven if you owe hundreds of thousands of dollars.
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What If I Cant Pay My Taxes Or The Late Fees
Many taxpayers can opt to set up a payment plan with the IRS using their Online Payment Agreement tool. If you can pay your taxes owed within a couple of months and owe less than $50,000, an Online Payment Agreement is probably your best bet.
An Offer in Compromise, on the other hand, is an agreement between you and the IRS to settle for a smaller amount if its actually impossible for you to pay the amount of taxes and fees that you owe.
Filing an Offer in Compromise should be more of a last resort than a first choice, though. The process itself is expensive, and if the IRS doesnt think your offer is appropriate, you have to start over. If at all possible, its better to go with the Online Payment Agreement.
Filing A Full Tax Return
Depending on your circumstances, you may want to consider filing a full tax return. There are a few reasons to consider this option:
To file a full tax return online go to MyFreeTaxes.com.
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Does The Irs Ever Negotiate The Amount Owed
Under certain circumstances, the IRS is authorized to resolve a tax liability by accepting less than full payment. An “offer in compromise” is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt. There are three circumstances under which the IRS is authorized to compromise:
Form 656: Offer in Compromise Package should be completed to file an Offer in Compromise with the IRS. Included with the Form 656 package are Form 433-A, Collection Information Statement for Wage Earners & Self-Employed Individuals and Form 433-B, Collection Information Statement for Businesses.
- You may need to complete the appropriate Form 433 and should be prepared to provide other documentation and explanations as they are requested.
- Various options are available for accepted Offers in Compromise requests, such as a reduced total payment and scheduled monthly payments.
- Defaulting on an accepted offer in compromise can result in the IRS filing suit against you and reinstatement of the original tax debt, plus interest and penalties.
Civil Penalties Added To Your Tax Bill
If your seriously late tax return shows taxes due, you will probably be fined 5% per late month, up to a maximum of 25% for five months past April 15.
Your return was due April 15 and you file on October 1 of that year. You may be charged 25% extra on the amount of any taxes you owe. If you file on August 16, you will be charged 20%four months times 5% per month. There is no daily proration of the penalty, so one day late costs the same 5% penalty as does 29 days. After five months, the late filing penalty stops increasing.
Thats not all. In addition to the late filing penalty, the IRS can impose a late payment penalty of H% to 1% per month. And heres a little more bad news: Interest is running all the while. Interest changes quarterly, and is compounded daily. And interest is charged on the penalties, too.
Tax bill interest is not deductible on your tax return, unless its for a business tax debt. Penalties are never tax deductible.
The lesson here is to pay the IRS as soon as you can, even if you have to borrow to do it. Getting out of paying these penalties is not easy, but can be done under certain circumstances.
For thorough information on paying all kinds of debts, see Solve Your Money Troubles: Get Debt Collectors Off Your Back & Regain Financial Freedom, by Robin Leonard .
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What If You Can’t Pay The Taxes You Owe
Even if you owe more taxes than you can pay by the income tax filing deadline, you should still file your income tax return on time to avoid late-filing penalties. If you are able to pay a partial payment on the amount owed the CRA might be more inclined to waive the penalties.
If the amounts and penalties owed are significant and there is no possibility of repayment either in full or via a payment schedule you may need to consult with a bankruptcy trustee who can further advise you of your options, including negotiating a Consumer Proposal with the CRA or declaring bankruptcy.
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File Without Penalty To Get A Tax Refund
Some people may choose not to file a tax return because they didn’t earn enough money to be required to file. But they may miss out on receiving a refund. The only way to get a refund is to file a tax return. There’s no penalty for filing after the April 18 deadline if a refund is due. Taxpayers are encouraged to use electronic filing options including IRS Free File which is available on IRS.gov through October 17 to prepare and file 2021 tax returns electronically.
While most tax credits can be used to reduce the tax owed, there are a few credits that allow taxpayers to receive money beyond what they owe. The most common examples of these refundable credits are the Earned Income Tax Credit, Child and Dependent Care Credit and Child Tax Credit. Those who don’t usually file and didn’t qualify for a third-round Economic Impact Payment or got less than the full amount may be eligible to claim the 2021 Recovery Rebate Credit when they file their 2021 tax return. Taxpayers often fail to file a tax return and claim a refund for these credits and others for which they may be eligible.
Generally, the IRS issues nine out of 10 refunds in less than 21 days for taxpayers who e-file and choose direct deposit. However, it’s possible a tax return may require additional review or take longer. The IRS processes paper tax returns in the order they are received.