Happy Tax Day! If that statement caused heart palpitations and frustration because you forgot to file and pay your tax obligations, take a deep breath and know that you are not alone. It is not uncommon for taxpayers to miss the tax deadline, add in the confusion that was running rampant in 2020 and it is possible that we have a higher than usual rate of missed deadlines.
But what happens if you missed the deadline? According to the Internal Revenue Service (IRS), those who miss the July 15, 2020 tax deadline generally fall into one of two categories: those who missed the deadline and expect a refund and those who missed and need to pay a tax bill.
For those who missed and expect a refund, there is little concern. The agency states that these taxpayers generally do not experience a penalty for filing a late return. However, the IRS strongly encourages those who owe a tax bill to promptly file and pay their tax obligations. The longer you wait, the more likely the following will apply:
- Late-filing penalty. A failure-to-file penalty is generally added to any late tax filings. This if often set at 5% of the tax due for every month the filing is late.
- Late-payment penalty. This penalty is generally set for 0.5% of the tax due for each month the tax payment is late.
It is important to note that these penalties are just the basics. Various factors can increase the penalty. For example, the penalty can increase if the tax payment or filing is more than 60 days late or if the agency can establish that the taxpayer is intentionally attempting to avoid their tax obligations.
What if I cannot pay my tax bill?
There are options. An attorney experienced in this niche area of tax law can review your obligations and discuss the benefits and risks of each payment options, better ensuring you choose the option that is best for your unique situation.