I applied for a tax file extension but missed the October 15 filing date. What should I do?
The simple answer is to file as soon as possible. The longer you put off filing, the more penalty fees and interest will accrue, increasing the amount of money you need to pay the IRS. When you do not file, you also open yourself up to the IRS taking criminal or civil action against you. There are a few more things you need to know to help you in preparing to file your late tax return.
Late to File, but Not to Pay
Hopefully, when you filed your extension to file your taxes, you paid an estimated tax before the April 15 due date. As long as you paid 90 percent of your official tax liability, then you do not have to worry about paying any late payment fees. You also avoid paying late filing charges if you ask for an extension, but once the October 15 deadline passes, the IRS will start to charge you. Penalty fees can be quite high at 5 percent of the tax per month applied to your account. This starts the day after the deadline and continues for all months and partial months you are late with no grace period. It does cap at 25 percent of your total tax owed. However, if you end up waiting more than 6 months to file, it is a minimum fee of $135 or 100 percent of your tax, whatever is less. Therefore, it is to your benefit to file as soon as possible, even if you have missed the deadline. You will have fewer penalties, and you avoid facing harsher problems down the line.
Late to File and Pay
Some people apply for a tax extension but do not pay an estimated tax payment. This means that you will not only face the late filing penalty charges if you miss the October 15 deadline, but you also face penalties for your late payment. However, the late payment fees will be calculated all the way back to the April 15 deadline. If you paid an estimated tax but it did not cover at least 90 percent of the tax, then you also will be charged penalty fees on the difference. The charges are less than non-filing at .5 percent. If you qualify for both penalty charges, then you will only be charged a 5 percent late payment fee. The maximum amount applied for just late payment penalties is 25 percent of the tax, but if you have both, then you could face up to 47.5 percent of your tax being added to your bill.
In the Case of Having a Reasonable Cause for Filing Late
If something came up that prevented you from filing your tax return by the October 15 deadline, then you could qualify for Penalty Abatement. This typically is approved for those who experience something in their lives, such as damage to their property, a death in the family, or an extended illness that made it impossible to submit their return on time. You have to prove that you worked as best you could to be compliant. It is beneficial if you can also show you had difficulty completing other financial or legal transactions around the October 15 deadline.
It is greatly to your benefit to go ahead and file your return and pay any remaining tax as soon as you possibly can if you find you missed the October 15 deadline after you have already filed a tax extension. You may still face penalty charges, but it will be a lot less than if you procrastinate.
Fidelity Tax Relief is here to help you with any of your tax debt relief solutions. We counsel our clients in the best solution, whether it is applying for an Installment Agreement, an Offer in Compromise, or Penalty Abatement. If you would like to discuss your situation, call us at today at 877-372-2520.