While most people file their tax returns and pay their taxes, saying either, they want to pay their fair share or just see it as a necessary evil. However, there are times when people fail to file reportedly due to a divorce, death, or financial reasons.
So, what are three reasons to consider filing a late tax return?
Missing the deadline doesn’t mean it’s too late to file your returns; instead, you should just file them. Some people miss the deadline because they owe taxes, are afraid of the IRS, or don’t owe taxes.
There are things you should know about filing your taxes late, such as why and how it happens, is there a penalty, or if there’s a cut-off date. To learn more about taxes and late filing, this article is for you.
1. You can reduce the penalties and interest added to your tax debt if you owe taxes by filing now.
No one likes to pay interest, especially when giving it to the IRS. Failure to file and failure to pay penalties can quickly increase the amount of taxes you owe. Not only do you get charged late fees, but they also charge you interest. If you file now, you can save yourself money down the road.
Sometimes people put off filing because they owe money to the government and can’t afford to pay it all at once. Therefore, if you haven’t filed, both the state and federal governments will allow you to set up a payment plan. However, if you miss a payment, they will end the agreement, and you’ll be responsible for the remaining balance.
2. There is no penalty for filing late taxes if you don’t owe taxes
If you don’t owe any taxes, you don’t get penalized for filing late. However, if you don’t file to claim the deductions and exemptions, the IRS may file for you and omit the deductions. If this occurs, they might calculate that you owe taxes. Since the IRS doesn’t use any of your deductions, you’ll have to pay the maximum possible taxes while also paying for falling to file, plus any associated penalties and interest.
You must file tax returns for the last six years to be considered in good standing with the IRS, and if you want to claim a tax refund for a past year, you must file within the three years. If you wait too long, the IRS will file a substitute return. However, when this occurs, you have 90 days to either file the past-due return yourself or file a petition with the court to argue your case. We strongly encourage you to call a tax expert if you receive one of these notices.
3. Fear of the IRS
If you were laid off or overwhelmed by Schedule C instructions due to the shutdown and dint’ file for several years, you could claim fear of the IRS. The IRS will accept this as a reasonable reason for filing late and remove all penalties and interest because the file didn’t have malicious intent.
It’s important to know that the IRS gives you a one-time penalty abatement waiver if you’re filing late.
Is There a Penalty For Filing Late?
There are many ways that filing your taxes late can cause trouble for you. The longer you wait, the more penalties you must pay. If you can’t pay in full, you should still file your tax return and then make payments through Michigan’s e-payment service.
In Michigan, the penalty is 5% of the total unpaid tax due for the first two months. Then after this, The IRS will add 5% each month. The max late penalty equals 25% of the unpaid tax owed.
Those who cannot pay the final bill can file a penalty waiver. They may waive the penalty if a taxpayer can show reasonable cause for failure to deliver on time. This includes serious illness, a fire or natural disaster, criminal acts against you, or fear of the IRS.
Need Tax Advice?
Never attempt to ignore or avoid the IRS. The phone calls and letters can be stressful, plus if you continue ignoring them, they can put a lien on your property or even put you in jail. If you haven’t paid your taxes, call our Michigan tax and accounting firm today, and we can discuss your options.
Tax Avenger in Canton has been providing full-service tax preparation and accounting services throughout the area for 20 years with great success. Whether you need tax preparation, business accounting services, bookkeeping services, or help starting your business, we’ve got you covered. Call today and schedule a Free Consultation!