The short answer is never. There are no time limits on the IRS for tax collections, and yes, the federal government will notice if you’ve skipped a year… or ten. No matter how long it’s been, you can always file late. But remember that sooner is better than later and that it will not be the same as filing normally.
Extensions
The IRS offers an extension up until tax day for those who aren’t going to be able to file in time, but those wanting to do so must file for an extension before then. This gets you an extra six months to get your stuff together. You’ll need to request an extension, since they’re not automatically assigned to everyone who doesn’t file before tax day. However, these are special cases in which an extension is freely given without asking for one:
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If you are a US citizen or resident and live or work outside the country during the tax day deadline, you get a little more time to file and pay without asking for an extension.
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If you are affected by certain natural disasters, you may get more time to file and pay. The IRS keeps a list of qualifying disasters for you to consult. Check out our previous blog post about natural disasters tax relief.
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Service members in the military may get an automatic extension, depending on where they are and what they’re doing. In some situations, they might even get more than six months.
If you know you won’t be able to file by midnight on tax day, or you can’t pay in full at that time, make the effort to request an extension. You can buy yourself a little time and eliminate the chances of getting a failure to file penalty.
Penalties
If you haven’t filed your tax return, you can be charged a failure-to-file penalty. These come to five percent of your tax bill per month. The penalty cannot exceed 25% of your unpaid taxes, if you pay within 60 days after the deadline. After that 60 day window, the minimum penalty is $135 or 100% of the unpaid tax (you pay whichever is smaller).
This penalty is different and separate from the failure-to-pay penalty, which is not as harsh. It’s important to note that the IRS charges interest on the amount you owe until you pay it off.
Yes, there are more damaging penalties and consequences for purposefully evading the IRS for years, but that’s a different topic for a different day. Check out our Tax Problems page for a brief breakdown of said consequences.
All of this may sound intense and overwhelming, but rest assured, Axiom Tax Resolution is ready to help you in whatever tax problems you find yourself having.
Filing Missing Returns
The IRS isn’t going to blacklist or intentionally destroy your life for making a mistake. If you filed for an extension, they won’t even care that you didn’t get your taxes done on time, as long as you are prepared to pay interest once you file. Things to keep in mind about filing:
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File your missing returns before the IRS demands it.
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There is no time limit beyond which you can skip filing, and there’s no time limit on when the IRS can collect from you.
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If you have a refund due, you have up to three years from the due date on the return. After that… no more refund.
Other benefits of filing missing returns:
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Protects your Social Security benefits if you are self-employed.
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Makes it easier to get a home or even auto loan, which can be denied or delayed if you can’t produce returns to prove your income.
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Helps you sleep easier because you don’t have to worry about the unfiled taxes.
What If I Can’t Pay?
As with many situations in life, if you communicate your issues up front, the other person(s) tends to be understanding and willing to help out or extend some grace. The same can be said of the IRS. They know that life happens, and that some are not able to pay their taxes in full or on time. But please don’t wait to discuss your ordeal with them until you’re in deep trouble and trying to climb your way out. Deal with the matter ahead of time, as soon as you realize you won’t be able to file and/or pay on time. Obviously, if you haven’t filed your taxes in years, you might lose out on a little goodwill, but don’t let it stop you from filing and paying.
If you can’t pay your taxes, penalties, and interest in one go, apply to the IRS for a payment plan. They have several to pick from with different time limits on them. This is where it’s imperative that you give Axiom Tax Resolution a call to review your options and help find the right solution for your tax problems.
If you are a US citizen or resident, you are expected to file and pay income taxes and the best course of action is to take care of things as soon as humanly possible to minimize penalties and interest. Unless you skipped filing on purpose, the IRS will work with you.
Keep in mind that April 15th is quickly approaching this year, so whatever you do, file your 2020 taxes by then or request an extension. If you’ve found yourself in a bad situation of missed filing dates and other tax problems, contact Axiom Tax Resolution today.
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