Tax season is a stressful time for both businesses and individuals. It means obtaining your tax information from employers, getting all your financial records in order, and filing with the IRS. As filing taxes every year is the law, you must do so by the due date, which is typically sometime in April. Unfortunately, many either miss this due date or do not file at all.
So, what are the reasons that you may be filing your taxes late?
Well, your financial records may have been destroyed or stolen, you may be dealing with the death of a loved one, or you may just be uneducated in how taxes work and confused. The key to remember is that some excuses are accepted by the IRS while other excuses are not and will incur penalties.
In the rest of this blog, we will discuss the reasons for filing late that are accepted by the IRS as well as the reasons that may receive penalties.
Approved Reasons for Late Tax Filing
Loss of Financial Records
Sometimes, financial records are destroyed or lost. Maybe there was a fire and your house burned down with your financial records in it. Maybe there was a natural disaster such as a flood that destroyed your records. Or maybe your home was broken into, and they were stolen. In such cases, if you can prove the loss of financial records to the IRS, they are likely to give you an extension and waive any penalties.
Illness or Death
The illness or death of a loved one or taxpayer is a trying time. At this time, filing taxes is the furthest thing from your mind as you either grieve or care for the ill. The IRS understands this difficulty and will grant leniency. This also includes if you are ill.
Unable to Receive IRS Help
Taxes can be complicated, especially for those that may have opened their own business the previous year and this is their first-time filing. Typically, the IRS and other institutions are there to help you through the process. There are times, though, when individuals are just not able to get the help they need. If you can prove that you made a just and reasonable effort to receive information and help but received none, the IRS may offer an extension and waive the penalty. This does not include being on hold for a long time and giving up, though.
Not Approved Reasons for Late Tax Filing
Ignorance or Confusion
Many people claim they were unaware of certain tax laws or were confused as to their reason for filing late or not at all. This is not a valid excuse. Ignorance of the law does not excuse you from not following it. If you are confused, you can always contact the IRS or other tax professionals for aid.
Forgetfulness
We are all busy people and sometimes filing taxes just slips our mind in the chaos of everyday life. With no emails, letters, or other correspondence to remind you of tax season, you just forget. Unfortunately, this is not a valid excuse either. Tax season happens every year, so if you find yourself being forgetful or life is becoming hectic, make a reminder for yourself on your phone or your calendar.
Reliance on a Tax Professional
For the most part, tax professionals are reliable during this time. There is the off chance, though, that they file late, but it is up to you to make sure that your taxes are on time. Be sure to follow up with any professional you are using and get confirmation that they are filed before the due date.
However, if a tax professional does give you incorrect information such as that you do not need to file at all, the IRS may grant leniency. You must prove that this information was given to you by a tax professional, though, not just someone you know who you believed.
The Penalty for Filing Late
If you do file your taxes late or not at all without a valid reason, you will incur a penalty from the IRS. The penalty is 5% of the taxes owed and does increase by 5% each month that you delay filing. The penalty will not exceed 25%. However, this penalty is just for failing to file your taxes. There is another for failing to pay your taxes. This is again 5% of the taxes owed and increases by 5% each month you do not pay, but it does not max out and will continue to accrue.
Summing Up
The IRS does understand that there are life circumstances that may delay you from filing, but this does not include ignorance or incompetence. If you find that you are unable to file for your taxes by the due date and do not want to pay the penalty, remember that you can always apply for an extension. Talk to a tax professional about what you need to do. When it comes to taxes, an accounting and tax professional can be of great benefit.
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