What to do After Forgetting to File Your Taxes
So, say this year’s filing deadline has slipped you by. Whether it was intentional or an honest mistake, you are by no means done with your tax return. If
anything, it is now more important than ever to complete it, double-check that all of the information you have included is correct, and submit it as soon as possible. Why so urgent? Well, let’s consider some of the ramifications of forgetting to file.
Starting the day after the filing deadline, you may begin to accrue penalties on your unpaid taxes. Foremost among these is the aptly-named failure-to-file penalty. Increasing at 5% intervals for each month that your return goes unfiled, it caps out at a hefty 25% of your unpaid taxes. If you have a tax debt to the IRS on top of this, you can also incur the failure-to-pay penalty, which is a beast in and of itself. These penalties can apply simultaneously, and although they cap out at 5% of your unpaid taxes in this case, the combination is definitely not one you want to sustain for any length of time.
At the same time that penalties are accruing, the clock is ticking down on your tax refund. From the filing date, you have three years to file a given tax return and claim that money. After three years and a day, that unfiled tax return will still be complicating your life, but any refund of money you overpaid to the government or got back for other things will be long gone.
As with a lot of things, having a valid excuse can award you some leeway in these situations. If, with the proper verifying documentation, you can prove that you truly attempted to pay your taxes but were unable, or were otherwise circumstantially prevented from doing so, the IRS may take that into account and alter penalties accordingly. However, your circumstances have to be of a particular degree, such as: the death, illness, incapacitation, or comparable absence of yourself or an immediate family member, a fire, natural disaster, casualty, etc., or inability to acquire important tax records. While penalties are frequently altered in the face of such circumstances, interest generally isn’t.
Keep in mind that the IRS may act far more aggressively than described here if this is not your first case of unfiled taxes. Additional penalties and even standard collection actions may be imposed upon repeat late filers.
In short: even if you miss the deadline, file as soon as possible. Any penalties will be lower, and it will keep you out of further trouble. If you want to ensure that your situation is handled as effectively as possible, a professional tax service can bring the outside eye and experience necessary.