Monday, 23 April 2012

What if you missed your tax filing deadline?

What if you missed your tax filing deadline?

Hello, it is April 24, and a whole week has gone by after the Tax Day on April 17th.

You must have filed your tax return, or requested an extension at the least. Even if not, do not press the panic button, the IRS is not going to pull you away and penalize you, still it would like to see your return filed, as soon as possible.

After April 17, all your appeals for a tax filing extension would be rejected by the IRS – but do not fret, there are other options you can explore, namely:

a. If you have a refund due, you will not be penalized for late filing, but if you overhaul the 3-year window before you forfeit your refund, you lose your refund. So be sure to file before April 15, 2015. Else, your refund will be converted into a simple donation for the US Treasury J

b. Else, you will have to eke out a late filing penalty - 5 percent of your unpaid balance per month, or part of a month, up to a maximum of 25 percent.

c. If you didn’t pay additional taxes owed by April 17, whether you filed an extension or not, a late payment penalty of one-half of one percent (0.5%) will also accrue each month or part of a month until the balance is paid in full.

If you have a valid reason for failing to file on time, the IRS may consider reduction of penalty charges. Remember, even those who have died are entitled to file a return, and their survivors could end up paying penalties for late filing!

If there’s a legitimate reason you miss the deadline such as a divorce, illness, death in the family, or a natural disaster, you can sometimes get those fees reversed.

When you get a past-due notice, just send a certified letter to the address it came from saying you are “requesting abatement.”  Then explain why you couldn’t file in time.

If you DON’T have a good reason for being late, just file as soon as possible to avoid that extra 4.5% penalty.

How does it work?

Example: Let's say you didn't file your return or extension by the April deadline, and you still owe the IRS an additional $2,000.
Best-case scenario: You file your return in late April of 2012 and submit your payment for $2,000. You would owe an additional $100 for filing late ($2,000 x .05) plus another $10 for late payment ($2,000 x .005) for a total penalty of $110.
(Had you filed your extension by the deadline, your total penalty would only be $10. It pays to file an extension!)
Worst-case scenario: You file your 2011 return in April of 2017, 5 years late, and submit your payment for $2,000. You would owe an additional $500 for filing late ($2,000 x the maximum .25) plus another $500 for late payment ($2,000 x the maximum .25), for a total penalty of $1,000.

Any circumstances while allow me to file late?

If you are out of the country on the April filing deadline, you are allowed two extra months to file your return and pay the amount due, without needing to request an extension.

You're out of the country if:
  • You live outside of the United States or Puerto Rico and your main place of work is outside of the United States or Puerto Rico; or
  • You are in military or naval service outside of the United States or Puerto Rico.
If you need more time, you can request four additional months by filing an extension along with paying any taxes you owe.

Other situations
  • If you have not received Form W-2, or you believe your Form W-2 is incorrect, contact the IRS for a resolution.
  • If you cannot pay the amount of taxes owed, you should file your tax return anyway before the deadline and pay as much as you can to avoid additional penalties. The IRS will send you a bill or notice for the balance due. In some cases the IRS can offer alternative account resolutions if a taxpayer cannot pay in full with the return.
  • If you are self-employed, you must file returns reporting self-employment income within three years of the original filing deadline in order to receive Social Security credits toward your retirement.

If you need to pay additional tax, ensure filing of your return at the earliest. The penalties for not filing are much higher than the penalties for not paying, and the longer you wait, the worse it gets. At least file your return on time, it can always be amended later!

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