Missing a tax filing deadline is a definitive no-no. While it is possible for you to request an extension, know that it would be best to file your taxes as soon as possible. In general cases of tax filings, the Internal Revenue Service (IRS) advises filing early to reduce penalties.
Read on to discover some advice you need if you fail to file taxes on time.
Advice on Reducing Fees and Interest Charges
Even if you missed the deadline, filing early saves you money in penalties and interest. Penalties and interest can only be avoided by filing and paying taxes.
Filing early and paying as much as possible are important considerations. Late tax returns are subject to penalties for failure to file and failure to pay. IRS fines are subject to interest. Penalties and interest add up quickly.
Advice on Incidents of Non-filing
The Failure to File penalty is 5% of the tax owed per month for five months (or a portion of a month). Even if you cannot pay your taxes, you must file as quickly as possible to avoid a penalty.
The Failure to File Penalty will be lowered by the Failure to Pay Penalty for the same month. Instead of a 5% Failure to File Penalty for the month, the IRS would impose a 4.5% Failure to File Penalty and a 0.50% Failure to Pay Penalty.
Advice on Incidents of Non-payment
The Failure to Pay penalty is 0.5% of the outstanding tax for each month or fraction thereof until the tax is paid in full or 25% is achieved. If taxes are not paid within 10 days after receiving an IRS Notice of Intent to Levy, the Failure to Pay penalty is 1% each month (or partial month).
If you owe unreported taxes, the IRS will issue you a notice or letter stating the amount owed as well as the due date. There is a 21-day notice period. In the event of nonpayment, a 0.5% penalty will be levied.
What You Have to Know about Penalty Interests
IRS fines are subject to interest and are often dictated by the start date, depending on the penalty. This interest will continue to accrue until the obligation is repaid. The interest rate on unpaid taxes is equal to the federal short-term rate plus three percentage points.
Advice on Contesting Penalties
If you filed on time, paid your taxes for the previous three years, and met other criteria, you might be eligible for First-Time Penalty Abatement. Certain fines may be canceled or reduced if you behaved in good faith and had a reasonable reason for not paying your taxes. Interest can only be abolished by removing the penalty.
To appeal a penalty, contact the IRS at the number listed on the notification. Make sure you prepare an IRS letter or notification, be able to describe the punishment that is being challenged, and valid reasons why the fee must be abolished in your case.
To avoid the Failure to File penalty, you may request an extension until a certain date. Failure to Pay penalties and interest will be assessed until payment is made.
How to E-file Your Taxes
Use your Online Account, IRS Direct Pay, debit or credit card, or digital wallet to pay your taxes on time and avoid penalties and interest. Installment arrangements are also available in case you are more comfortable with this setup.
The great thing about electronic transactions is that they are confirmed instantly. In this case, Direct Pay and Electronic Federal Tax Payment System (EFTPS) both deliver payment confirmation through email.
Doing your taxes is a task nobody finds appealing. However, the law requires all of us to do them right and on time. Thankfully in these modern times, tax filing and payments can be done easily with the help of professionals, and with the existence of electronic payments, we never have to get behind and miss deadlines.
Are you in need of tax relief solutions? Axiom Tax Resolution Group is here to help you through your taxes and guarantee on-time filings and payments. Give us a call today to learn more about our services!