In 2020 and 2021, taxpayers were granted relief to file their taxes late instead of filing on April 18, like every prior tax year. The relief was given due to the Covid-19 pandemic. But now, things are back to normal, and so for the 2021 tax year, the due date was April 18, 2022.
Taxpayers often neglect the tax filing deadline date because of various reasons including missing documents, improper bookkeeping, busy activities or events going on in their firms, or they might simply forget the date. So they may file their tax returns late. Therefore, they have to face a penalty for filing tax returns late. The longer the delay, the worst the consequences can become. The IRS charges hefty penalties for filing late tax returns or not filing at all.
We have discussed here briefly what fines will be charged against you for filing late tax returns. We have also mentioned some ways to get rid of these penalties and save yourself from a financial crisis.
Humans make errors, and the best way to deal with them is to find a method to fix them. If you have neglected to file your tax return, don’t panic; instead, consider your options. The IRS assesses a late filing of tax return penalty.. However, if you had timely filed an Extension of Time to file your Tax Return by the April deadline date you may have received an extension of 6 months allowing you to file your 2021 tax return by the extended filing deadline date of October 17, 2022. However, you would still have needed to have paid your 2021 estimated tax by the original April 18, 2022, deadline date, to have avoided the penalty for late payment of your tax (if at least 90 percent of any tax you will owe is not paid by the April deadline date, the IRS can assess a penalty for late payment of tax)..
It is preferable to file late than to hide your error and not file at all. The longer you wait, the higher the penalty for this late filing.
The IRS imposes a penalty for late filing, often known as the failure to file penalty.. The penalty charge can be calculated as follows.
The IRS sends a penalty notice, and if you do not file by the due date, you will be fined as mentioned above. So, timely filing your tax return and timely paying all of any tax balance owed is the greatest approach to avoid penalties. There are many additional strategies that can help you to avoid stacking up penalties, such as:
If your bookkeeping isn’t up to par and you need time to gather your paperwork, but your filing deadline is approaching, it’s best to ask for an extension. You may seek an extension before the April deadline.
The majority of people do not file tax returns because their taxes are more than their ability to pay. However, intentionally failing to report your federal taxes is considered a felony by the IRS. That is why the IRS charges you more for not reporting your taxes than the IRS charges you for paying your tax late. So, even if you are unable to pay your tax in full right now, it is preferable to report them in order to avoid penalties in the future.
IRS laws apply to the general public, and they are not as stringent as one may believe. The IRS gives relief to taxpayers who face a failure to pay tax penalties in cases of emergency or some other reason that may be acceptable to the IRS. The IRS may provide some alternative ways through which a taxpayer may pay his or her tax easily.
When the IRS assesses fines against you, the first thing you should do is ask for penalty abatement (removal). The elimination of your fines by the IRS is known as penalty abatement. This offer is accessible to responsible taxpayers who have not received a penalty in the prior three years and who are current on their taxes. The IRS acknowledges that individuals may have a misfortune that prevents them from filing their tax return on time, such as an accident, the death of a loved one, or illness. In these pitiful instances, the IRS may abate (remove) the penalty due to what the IRS calls reasonable cause to warrant the abatement (removal) of the penalty by the IRS.
The IRS provides taxpayers with a variety of payment options. If you are able to file all of your overdue tax returns at once such that all of the tax returns that are required to have been filed with the IRS have now been filed with the IRS, then for the tax balances owed, you may request an installment (monthly payment) plan. You may need to haggle with the IRS for the IRS to allow you to pay off your back taxes in installments.
Offers in compromise (OIC) happen when an IRS official accepts less than the full amount owed by a taxpayer. This also necessitates discussion with the IRS and the submission of copies of certain supporting documentation to the IRS and demonstrates that you are unable to pay such a large sum, and you can only pay a percentage of the entire tax balance.. The IRS realizes the difficulties that honest taxpayers face, and if the taxpayer can satisfy specific conditions, the IRS might agree to the taxpayer’s offered lessor payment in satisfaction of the entire tax owed by accepting the taxpayer’s OIC.
You should not be worried if you are experiencing trauma, accident, or financial difficulty as a result of natural catastrophes such as floods, earthquakes, or fires that have destroyed your livelihood. The IRS might place you into Currently Non-Collectible (CNC) status, which indicates that you are now unable to pay your unpaid taxes. However, after you have restored your financial stability, you must repay them. Every year or two the IRS pays you a visit to see if your financial position has become stable or not.
Tax Penalty issues need a huge amount of paperwork, understanding of IRS statutes, and knowledge of all of the loopholes available to taxpayers. As a result, it is preferable to employ a tax relief company and seek the assistance of a tax professional for assistance with your IRS back taxes. These experts include tax attorneys, accountants, lawyers, and Enrolled Agents. They have a legal understanding as well as experience in dealing with the IRS. They can fully investigate your case and give the finest counsel to help you with your penalties. Furthermore, they can negotiate with the IRS on your behalf and possibly persuade the IRS to waive your fine either due to you having a good compliance record for the prior three years or by demonstrating reasonable cause that could possibly warrant the abatement (removal) of penalties by the IRS. So, if you have gotten an IRS notice, get up and call tax professionals right away.