Thousands of American taxpayers have entrusted their unclaimed tax refunds to the IRS. That adds up to more than $1.5 billion each year.
If you’re reading this and it’s still 2023, the US tax deadline of April 18th has already passed. For those who have not yet submitted, now is the time to act to avoid increasing costs.
People miss their tax filing deadlines for a variety of reasons, from life events to taxpayer shortages. financial records Procrastinate. Acting quickly can limit your exposure to fines and interest — and by filing now, tax refund you may be right.
What to do if the tax deadline has passed
The first thing to do is file as soon as possible. Doing so will stop bleeding from filing penalties.For Refund Recipients 80% You will not be penalized for late submission.
“If you get a refund, you’re not behind on your taxes,” said Patrick McCormick, a Pennsylvania-based attorney. “That means you don’t face penalties or interest on late taxes because there are no late taxes.
You can still apply for free after the April 18th deadline. free file program Offered by the IRS through mid-October.This program is open to anyone with an adjusted gross income of: $73,000It guides users through a list of simple questions and interfaces with popular software such as TaxAct and TaxSlayer.
Free File Program is also available, who earn more than $73,000, the calculator may be trickier. Note that additional charges may apply for filing state taxes.
Delayed Qualifying for Overtime or Penalty Relief
Most people who have not yet applied for an extension in 2023 are out of luck as the tax filing deadline has passed. However, certain groups are automatically eligible to apply for and pay more periods, and these people do not receive penalties or interest during the extension period.
“Taxpayers can request reduced penalties for reasonable reasons, such as illness or natural disaster,” adds New York-based tax attorney Yvonne R. Court.
“If the taxpayer has a good history of filing and paying on time for the last three years,” she points out. initial weight loss programInterest accrues until payment is made. ”
It is important to remember that a tax filing extension does not extend the tax deadline, it only extends the filing deadline, which usually takes six months. The key is to pay sooner or later to reduce or eliminate interest penalties.
Potential Consequences of Missing Tax Filing Deadlines
Fortunately, the costs associated with late tax payments eventually reach a ceiling at a certain level. The bad news is that this level is relatively high. Also note that criminal penalties apply only in cases of intentional tax evasion.
In some extreme cases, after a series of notices, the IRS will tax lien, to warn other creditors about government claims on your debts. The lien is taxationthis is when the garnishment of wages and the seizure of assets begins.
However, most of the time, it’s highly unlikely that you’ll reach that point. The two main penalties commonly encountered in late tax situations are non-filing penalties and non-payment penalties. Both will begin shortly after the submission deadline has passed.
filing failure
“This fine is equal to 5% of unpaid taxes and increases by 5% each month to a maximum of 25%,” explains Sara Sharp, founder of Acta Tax Consulting. “In other words, after five months of delay, the penalty is at its highest level.
non-payment
“We charge a fee equal to 0.5% of the tax balance for each month in which taxes are not paid,” Sharp continued. “This penalty increases by 1% each month if he does not pay the tax within 10 days of receiving the IRS letter.
interest penalty
In addition to the above penalties, delinquent taxpayers may be subject to interest penalties on unpaid tax invoices.
Connecticut CPA Eliot Bassin explains: “These amounts add up quickly when you consider the interest and penalties payable at the state level.”
“If you can’t afford to pay the outstanding amount, you should consider: Other options, setting up installment contracts, etc.,” he adds. “Installment contracts allow an amount that must be paid over a period of time and usually have lower interest rates and fines.
How to Plan More Effectively and Avoid Tax Problems
Prevention is always the best cure when it comes to financial problems. Staying ahead of tax planning is an easy way to stay on the right side of the tax authority.
“Set reminders for yourself so that you are aware of important dates such as tax deadlines,” says Bassin. “We recommend setting multiple reminders, for example, 6 weeks out, 4 weeks out, etc.
“For customers who are prone to debt, we recommend opening a tax-saving account. Transfer funds to the account regularly,” he added. “This eliminates the need to move large sums of money near application deadlines.”
It is also beneficial to seek professional help. “It’s imperative to stay in touch with tax filers and track quarterly deadlines, especially if you pay quarterly taxes as an independent contractor,” McCormick explains.
Cort shares another strategy – centralize relevant materials: “Keep a physical or digital file where you can put your charity receipts and other tax documents year-round.”
This article was written and distributed by Wealth of Geeks.