Filing taxes can be a stressful experience, especially when the deadline has passed. The federal tax deadline was April 15 for most filers, and missing it can have serious consequences. If you still owe taxes for 2023, you’ll continue racking up penalties and interest until you file and pay your outstanding balance, as per the IRS guidelines. The late filing penalty is 5% of your unpaid balance per month or partial month, capped at 25% of your total balance. On the other hand, the fee for failure to pay is 0.5% per month or partial month, with a maximum fee of 25% of your unpaid taxes. Interest is based on the current rates, further adding to the financial burden.
According to Mark Steber, chief tax information officer at Jackson Hewitt, delaying the filing process can lead to higher penalties and interest from the IRS and state. This highlights the importance of filing your return as soon as possible. However, rushing to file the return without accurate information can have its own set of problems. Missing key information, such as tax forms for investments or other earnings, can lead to the IRS flagging your tax return for audit or processing delays. Inaccuracies in the return can result in receiving an agency notice as well. Therefore, it is crucial to ensure the accuracy of the information provided in the tax return before submitting it.
In case you are unable to pay the tax balance in full, the IRS offers various payment options to help you manage the outstanding amount. Some online choices for late tax payments include IRS Direct Pay and your IRS online account. Additionally, there are payment plans available for taxpayers facing financial difficulties. The short-term payment plan allows individuals to pay off balances of less than $100,000, including tax, penalties, and interest, within 180 days. On the other hand, the long-term payment plan is suitable for balances of less than $50,000, with monthly payments required over a period of 72 months.
For individuals who qualify, there is an option for first-time penalty abatement, which can be considered a “‘get out of jail free’ request,” as described by Nicole DeRosa, a tax partner at accounting firm Wiss & Company. Eligibility for this abatement depends on the type of penalty and your previous compliance with the IRS. If approved, this option can provide relief from certain penalties associated with late tax payments.
Missing the federal tax deadline can have serious consequences, including penalties, interest, and potential audit flags. It is essential to file your return accurately and promptly to avoid further financial liabilities. If you are unable to pay the balance in full, exploring payment options and potential penalty abatement programs can help ease the burden of outstanding taxes. Remember, it is always better to address tax obligations proactively to avoid escalating financial difficulties in the future.
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