Sometimes life happens. Whether it’s a job loss, severe illness, loss of a loved one, or other big life event, it can be hard to focus on taxes.
However, it’s important to know that filing late with the IRS is always far better than not filing at all. There are, however, a few things to note if life throws a curveball requiring you to file taxes late.
There is no penalty for filing late if you are owed a refund. However, the IRS will only hold your money for so long. If you do not file your return within three years of the original deadline, you will lose it. Don’t let the IRS keep any more of your money than you’ve already given.
If you cannot file your return on time, make sure that a valid extension is filed by the due date, and payment is sent with the extension if you think you owe taxes. An extension gives you more time to file the return, but doesn’t give you more time to pay. If you still fall short even after the extension is filed, the penalty is far less than the penalty associated with not filing at all.
Interest rates are applied to what you owe to the IRS beginning one day after your bill was due. Income tax interest rates are far less than payroll tax interest rates, however, it can add up quickly if no action is taken.
If you are a first-time offender in filing late, the IRS offers a penalty abatement for those who meet the criteria. If you are a repeated offender, you should be aware that penalty abatements will not be handed out each time. Criteria for this resolution can be found on the IRS website.